*Note: also cross-posted to r/SmallCapStocks but posting here for hopefully some more views!!
Hi all. I'm new to Reddit. I'm 30, and I've finally committed to try to invest my retirement account funds properly, instead of in some high fee & low return target date fund.. I want to put it in something high return and am fine with the risk, hence: interested in small cap. I have now read numerous articles saying that small cap (& in particular, small cap value) outperforms the S&P 500 over the long run. However, I look up the funds they recommend, and it just is not the case... I can't find a single small cap index fund that outperforms S&P 500 index fund - I'm so confused. I think I am missing something - is it really dependent on the measurement period (have small caps been doing badly the past 50 years or something)? Let me list it out, for example, 2 below very popular and established small cap funds - I won't list all, but I have googled SO many popular small cap index funds (Fidelity, Vanguard, etc.) & it's all about the same as the below - they seem to not perform as well compared to S&P 500:
| 1-year | 3-year | 5-year | 10-year | Life | |
|---|---|---|---|---|---|
| FXAIX (Fidelity Index 500) | 18.40% | 14.17% | 15.21% | 13.87% | 10.73% (since 1988) |
| FCPVX (Fidelity Small Cap Value) | 11.18% | 4.51% | 9.22% | 9.97% | 10.09% (since 2004) |
| VSMAX (Vanguard Small Cap Index Blend) | 19.11% | 11.22% | 13.60% | 12.01% | 10.81% (since 1960 - just barely higher than the 1st row) |
And yet, in the below article by Paul Merriman - and many others support this:
"Fortunately, we have data that lets us look at every 40-year period since 1928. I think the numbers are very instructive.
Taking all those periods into account, the S&P 500’s average 40-year return was 10.9%, considerably less than the 16.2% average for small-cap value stocks.
The best 40-year period: 12.5% for the S&P 500 and 19% for small-cap value. The worst 40-year period returns were 8.9% and 11.6%, respectively."
Huh?
Would really appreciate any guidance. I've been googling this for days now... I just don't get it. And if you do know any small cap value fund (preferably some sort of index fund) that actually does outperform S&P 500, what exactly is it??? Thanks so much!!
Submitted January 27, 2021 at 09:26PM by purpleorchidgarden https://ift.tt/3t2zCbx
