Home  |  Personal Finance  |  Investing  | 

Understanding U.S. and Foreign Stocks

What is the importance of value and small cap stocks?

To properly view this site, javascript must be enabled and Flash version 9 or higher must be installed.
Get the latest Flash player
David John Marotta
President, Marotta Wealth Management, Inc., Marotta Wealth Management, Inc.
http://www.emarotta.com  
434-244-0000

David John Marotta is the President of Marotta Wealth Management, a fee-only financial planning and asset management firm in Charlottesville, Virginia. He is an oft-quoted writer and speaker on financial matters and his weekly financial column can be found at www.eMarotta.com

What is the importance of value and small cap stocks?

 

This expert: 177,662 views

This series: 11,047 views

Download to Mobile Device
Tags:

Stocks

,

Money

,

Investment

,

Portfolio

,

Assets

Comments:

0 (Read Comments) (Add Comment)

Print

Transcripts

Host: What is the importance of including an emphasis on value and small cap stocks?

David Marotta: Small cap stocks make more than large caps stocks and value does better then growth. So, we recommend emphasizing a little bit more small cap value moving your portfolio that way and not as much large cap growth. This will boost your returns and one way of illustrating it is to look at the Tech bubble that burst in 2000, 2001 and 2002. In 2000, when large cap growth lost 33%, small cap value actually continued to go up another 19%. The next year in 2001 large cap growth lost about 29%, small cap value continued to go up another 19%. So, even though the Tech Bubble started to burst in 2000 and 2001, in 2000 it was growth that went down and in 2001 both growth and large cap went down. It was until 2002 that small cap value went down and then that year large cap growth fell apart completely. It was down 33%. Small cap value only went down 8%. So, over that three years of dropping markets, large cap growth lost over 68% of it's value and small cap value actually gained 29%. So diversifying in those years into small and value ended up saving your portfolio, just like diversifying into foreign bonds and bonds and foreign stocks which didnt lose as much and hard assets stock which actually did great ended up diversifying your portfolio. So, you can limit your returns, losses simply by diversifying your portfolio among all the different categories and you can actually boost your returns by emphasizing more small and more value.

Other Videos

  • What is identity theft?

    What is identity theft?

    In this video, Linda Sherry details the best ways to prevent identity theft and what you can do if you think your identity has been stolen.
  • How to Handle a Tight Budget

    How to Handle a Tight Budget

    The tight economy is putting a squeeze on everyone's wallets these days, and you may be looking for some reliable sources of extra money. Personal finance experts Ken & Daria Dolan of Dolans.com reveal a few options, including which ones you should avoid.
  • How to Read & Correct Credit Report Errors

    How to Read & Correct Credit Report Errors

    In this video, financial planning professional and member of the Financial Planning Association®, Cal Brown, MST, CFP®, describes the four important steps to improving your credit. This video is designed for individuals who have poor credit and are looking for tips to improve their credit. This video series includes an overview of checking your credit, reading and correcting credit reports, improving your credit and getting out of debt.
  • Understanding Foreclosure

    Understanding Foreclosure

    Give yourself every advantage when you're facing foreclosure. And get tips on how to avoid finding yourself in that situation. Expert Amelia Robinette explains what foreclose means, how banks make their decision and what you can do to get back on track.
  • What is a stock index?

    What is a stock index?

  • Why is financial knowledge power?

    Why is financial knowledge power?

    In this video, Vikki Frank, Kandance Beamon, and Linda Stroman, financial education providers describe several key areas to address regarding debt reduction and elimination. This video is designed to deliver basic financial information to assist individuals and families to be able to identify goals and process strategies for their specific financial needs. The topics included in this video cover are: self-evaluation of debt load, budgeting strategies, understanding the effects on your credit and scores, why savings is important, how to develop a debt elimination plan, and the importance of financial education and how financial counseling may be useful.