“Secret” is an often-misused word, and maybe I’m just making the situation worse. But with the stock market reaching new highs week after week and optimism apparently running wild, it’s extremely easy to overlook this:
But from 2000 through 2009, the index’s performance was the worst in that group. From 2010 through 2019, the S&P 500 was the best of that group. In fact, they tend to follow what I think of as “the sales pitch” for smart diversification. This “sales pitch” is nothing more than a summary of academic researchers telling us what we should expect.2. Small-company stocks outperform large-company stocksOver nine decades, the 1930s through the 2010s, the markets delivered this:• Small-cap stocks, both blend and value, outperformed large-cap stocks;When you’re looking at short-term returns, these patterns are often impossible to discern.
In addition to the six asset classes I discussed, you’ll find pink boxes labeled “4-Fund Combo.” This represents an equally-weighted combination of the four major U.S. asset classes: the S&P 500, large-cap value, small-cap blend, and small-cap value. And here’s something else interesting: stocks failed to outperform bonds three times: in the 1930s, the 1970s, and the 2000s.• Small-cap value is on top three of four times.The longer your time frame, the more the reality of the market lives up to the sales pitch I outlined earlier. Conversely, when you look at only a year at a time, the market is tough to predict.
A lot of good date here