Should You Invest In Small and Mid Cap Stocks? Is Now the Time?
Money For the Rest of Us
J. David Stein
4.5 • 1.4K Ratings
🗓️ 12 January 2022
⏱️ 30 minutes
🧾️ Download transcript
Summary
Small and mid-cap stocks have underperformed large-cap stocks for over a decade. Is now the time to increase your allocation?
Topics covered include:
- How big are small and mid-cap stocks
- How have small and mid-cap stocks performed relative to large-cap stocks
- How have active small and mid-cap managers performed relative to indexing options
- Are bigger IPOs contributing to small and mid-cap stocks underperformance
- How expensive or cheap are small-cap stocks relative to large-cap
- What is the capital asset pricing model and how do academics use it to identify outperforming factors
- How value, momentum, and quality drive small-cap stock outperformance
- How to invest in small and mid-cap stocks
Thanks to Policygenius for sponsoring the episode.
For more information on this episode click here.
Show Notes
The Morningstar Active/Passive Barometer
Factor Timing: Keep It Simple by Michael Aked—Research Affiliates
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Transcript
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| 0:00.0 | Welcome to Money for the Rest of Us. This is a personal finance show on money. |
| 0:05.0 | How it works, how to invest and how to live without worrying about it. |
| 0:09.0 | I'm your host, David Stein, today is episode 370. It's titled, |
| 0:14.0 | Should you invest in small and mid cap stocks? |
| 0:19.0 | I recently got two emails from members of Money for the Rest of Us Plus |
| 0:24.0 | asking about investing in smaller and midsize companies. |
| 0:29.0 | These companies are called small cap and mid cap and cap stands for |
| 0:34.0 | Capitalization, which is a measure of the size of a publicly traded company. |
| 0:40.0 | Capitalization is measured by the number of stock shares outstanding times the price. |
| 0:48.0 | One of these members sent me a detailed spreadsheet that had performance |
| 0:54.0 | taking from Morningstar of a number of different ETFs comparing large cap US stocks, |
| 1:00.0 | small cap stocks, mid cap growth value momentum. |
| 1:04.0 | I won't get into all that data, but one of the things is clear over the past decade. |
| 1:10.0 | Large company stocks have been fairly consistently outperforming small company stocks. |
| 1:19.0 | If we go back over the past decade, small cap stocks have only outperformed |
| 1:24.0 | large cap stocks on an annual basis four times. |
| 1:28.0 | And mid cap stocks have outperformed large cap stocks only three times over the past decade. |
| 1:35.0 | The other member was looking at performance of mid cap stocks versus large company stocks. |
| 1:40.0 | And their question is the same. |
| 1:42.0 | Has something fundamentally changed to which large company stocks |
| 1:47.0 | will consistently outperform mid cap and small cap stocks going forward. |
| 1:52.0 | We're going to explore that question in today's episode. |
... |
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