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: 131,280 views

This series: 7,958 views

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

  • Why are interest rates so important? 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.
  • What is student loan forgiveness?
  • How to Sell a Home - Short Sale This video provides tips from experienced realtors and mortgage brokers on how to sell a home, buy a home, price a home and select an agent. Get the best deal you possibly can when either buying or selling your home!
  • Why does my financial aid award notice say, "preliminary?" In this video, Mr. Barnett discusses what a student should do after receiving a financial aid award notice.
  • What deduction options do I have when filing a tax return? Basic information to prepare an individual income tax return, Form 1040 and the basic schedules. This video is designed for those individuals who want to undertake the preparation of their tax return. There are tips and pointers for those who have attempted this feat in prior years.
  • How and When to Use a W-2 Form Basic information to prepare an individual income tax return, Form 1040 and the basic schedules. This video is designed for those individuals who want to undertake the preparation of their tax return. There are tips and pointers for those who have attempted this feat in prior years.