The quarantine for the Coronavirus has given me an opportunity to review some old posts.
I was somewhat surprised to read many old posts warning us about the risk in Small-Cap and Small-Cap Value Funds (Small-Cap Value Funds are the worst performing of all Morningstar style categories). These were some of the warnings that have come true:
12-18-99 by Taylor: "Before you rely on past returns "proving" Small Company Growth funds to be the worst performers, consider this from John Waggoner in USA today 12-17-99: "Small-Company growth funds soard 372% the past 10 years, vs. 183% for small-company value.
8-26-2000 by jdvmd54: "DFA people keep saying small will outperform in the future. That is simply wrong and misleading. No one really knows."
8-15-2001 Taylor quoting Bogle: "Much of the early data on small caps is terribly flawed."
8-31-2001 by Vanguard's Gus Sauter: "I do not believe there is any reason to suspect that a given style will provide long-term outperformance. -- By buying the entire market, you significantly reduce the risk that such a focused approach entails."
4-09-02 by mole1: Interview with Burton Malkiel: "But if small stocks do poorly, anyone who put half his assets there when the rest of the market has only 20%, will fell like an absolute idiot. That's why I think a total stock market index fund is not only the simplest, but the very best core investment for most people."
11-28-02 astigra posted interview with Jack Bogle: "The evidence to justify the claim of small-cap superiority is too fragile a foundation on which to base a long-term strategy."
6-30-2003 by Taylor: "Overweighting styles and sectors is not that important in the long-term, and may not make any difference at all." - Rick Ferri' There are many authorities that agree with Rick's statement. I happen to be one of them. Mr. Bogle is another."
8-12-03 Lucas McCain posted this Rick Ferri quote: "I am 100% convinced that slice and dice has much more to do with marketing than money management."
8-28-2003 Houge-Loughran Study: "We Find no evidence that value portfolios significantly outperform growth portfolios."
9-8-2003 Taylor posted interview with Jason Zweig: "The so-called 'small-cap premium' is a complete illusion."
10-04-2003 Rick Ferri: "By overweighting to small-value, you are also adding risk above and beyond stock market risk."
1-02-2004 by ChristineM on Value study abstract: "The value premium is a small, concentrated and dying phenomenon."
03-16-04 by hafis50: "An economic downturn after the bursting of a stock market bubble may adversely affect small caps and value stocks much more than TSM."
4-09-2006 by Taylor: "My own feeling is that you can't go wrong (especially in taxable accounts) owning Total Stock Market Index Fund which owns nearly all growth, blend, and value stocks."
8-16-2004 by Taylor: "In my opinion it is very difficult (and may be dangerous) to try to "beat the market."
8-23-2004 by travismorien quoting Charlie Munger (Buffett's business partner): The whole concept of dividing it up into "value" and "growth" strikes me as twaddle. It's convenient for a bunch of pension fund consultants to get fees prattling about, and a way for one advisor to distinguish himself from another."
9-17-04 by jijnxxx: "Slice & dicers frequently mention the Fama/French influence on their strategy of tilting away from the cap-weighted total market and towards value and small-stocks. It's interesting that Fama himself does not endorse this interpretation of his research."
12-18-04 by Taylor: "Gummy has a webpage showing annual and average Value and S&P 500 returns and volatility from 1928-2000, During this period, Value stocks experienced approximately 50% more volatility than Growth stocks."
4-29-2006: Wm. Coaker II quote: "In 1998-1999 when the S&P 500 gained 55.6%, small value lost 7.9%."
7-18-2006 by Steverino: "Also, beware that small stocks can get hammered in down markets."
9-23-2006: by Taylor: "It was not long ago that few investors wanted to own Small Cap Value (SCV).Those that did were sorry. 15 year returns: LCG 17.15%; SCV 11.34%"
6-15-007 Bogle Blog: "I'm not one for trying to guess which styles will outperform or underperform--or when--and the data clearly show such changes are anything but sustainable or predictable."
8-17-2008 Taylor posted this Vanguard Quote: "After considering the evidence, Vanguard maintains that investors should generally hold market-weighted equity portfolios."
2/8/2015 JoMoney: "Portfolio Constituency Rules and Value Premium in the Small-Cap Value Space": "Our results may go a long way in explaining why the returns of market-based growth fund managers are statistically equal to returns of value fund managers over time
9-7-2017 Nisiprius: "There is not the slightest bit of support here for the idea that the value factor had any important effect in minimizing the effect of a bear market."
11/06/2018 Taylor: "According to a 90-year study by Bessembinder, when buy-and-hold portfolios of stocks are sorted by beginning market cap and held for a decade, large-cap portfolio returns are higher (153%) than the mean returns for small-cap portfolios (97%).
11/26/2018 Vanguard: "We believe that your portfolio should be style-neutral, not based toward either growth or value stocks."
Lesson learned: It can be expensive to ignore Boglehead Forum advice.
Jack Bogle's Words of Wisdom: "Total market indexing is the gold standard. Anything else, like sector investing, is a dilution of that standard."