“ Historically, the stocks of smaller companies have outperformed those of larger companies. And relatively inexpensive stocks have outperformed more expensive stocks. ”During times of great uncertainty, like we’re experiencing now, investors may feel tempted to project today’s headlines forward or forget the useful lessons we’ve learned from the past.Too often, news headlines distract us from taking the long view. They create a sense of urgency around what’s happening in the market right now.
There’s solid theory behind thinking about investments in this way, but the premiums don’t necessarily show up every day. In fact, there can be long stretches when they don’t — stretches that can test the faith of investors.Plus: Warren Buffett said this metric signaled the 2001 crash — now it’s sounding the alarm on global markets
We’re experiencing a similar historical variance right now with value stocks. Over the past decade, growth stocks have largely outperformed value stocks. But it’s important to keep things in perspective. According to Dimensional’s research, while value’s performance in the U.S. from 2009-2019 was in line with its historical average , growth significantly exceeded its historical average .
I’m often asked what investors can do during times like these. The key to capturing any premium is to maintain consistent exposure to it. While we understand that the value premium may not show up every day, every year, or even every decade, sticking with value stocks can help you capture that premium over time.No one can predict when premiums will show up, but we know they can show up quickly.
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The stock market is a complete fraud.
Bs
... Or you can stick to an index fund instead of riding this irrational roller coaster 🎢
I subscribe this opinion wholeheartedly. If only clients were as patient. *sigh*
Hard pass, I'll stick with docusign, Amazon, PayPal, and MercadoLibre
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