Small cap lagging large cap in portfolio

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Gorlow
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Re: Small cap lagging large cap in portfolio

Post by Gorlow »

Thank you all for your responses. I now know the difference between rebalancing and asset allocation. My plan doesn’t offer a total market fund but it offers a target date fund. I feel like once I get to an 80/20 split I’ll be more comfortable. I just don’t know if I should rip the band-aid off and reallocate now or wait to see if small cap catches up.
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arcticpineapplecorp.
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Re: Small cap lagging large cap in portfolio

Post by arcticpineapplecorp. »

Gorlow wrote: Wed Jul 03, 2024 1:30 pm Thank you all for your responses. I now know the difference between rebalancing and asset allocation. My plan doesn’t offer a total market fund but it offers a target date fund. I feel like once I get to an 80/20 split I’ll be more comfortable. I just don’t know if I should rip the band-aid off and reallocate now or wait to see if small cap catches up.
why not use a target date retirement fund?

if you say you don't want fixed income, at what point do you think you might? And then fixed income should be in the 401k (and stocks in Roth IRA and taxable) when possible to be tax efficient.
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Topic Author
Gorlow
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Re: Small cap lagging large cap in portfolio

Post by Gorlow »

arcticpineapplecorp. wrote: Wed Jul 03, 2024 1:42 pm
Gorlow wrote: Wed Jul 03, 2024 1:30 pm Thank you all for your responses. I now know the difference between rebalancing and asset allocation. My plan doesn’t offer a total market fund but it offers a target date fund. I feel like once I get to an 80/20 split I’ll be more comfortable. I just don’t know if I should rip the band-aid off and reallocate now or wait to see if small cap catches up.
why not use a target date retirement fund?

if you say you don't want fixed income, at what point do you think you might? And then fixed income should be in the 401k (and stocks in Roth IRA and taxable) when possible to be tax efficient.
The expense ratio is much higher and both the large and small cap funds have vastly outperformed the target date fund.
coachd50
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Re: Small cap lagging large cap in portfolio

Post by coachd50 »

Gorlow wrote: Wed Jul 03, 2024 1:30 pm I feel like once I get to an 80/20 split I’ll be more comfortable.
Why?
I just don’t know if I should rip the band-aid off and reallocate now or wait to see if small cap catches up.
That isn’t quite how allocating works. The idea is to consider the multiple personal factors involved in the investment decisions- determine based on a wide scope of history what a proper allocation based on those personal factors should be - and then get your positions to that point.
Last edited by coachd50 on Wed Jul 03, 2024 2:14 pm, edited 1 time in total.
Nubomb
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Re: Small cap lagging large cap in portfolio

Post by Nubomb »

Gorlow wrote: Wed Jul 03, 2024 1:30 pm Thank you all for your responses. I now know the difference between rebalancing and asset allocation. My plan doesn’t offer a total market fund but it offers a target date fund. I feel like once I get to an 80/20 split I’ll be more comfortable. I just don’t know if I should rip the band-aid off and reallocate now or wait to see if small cap catches up.
Curious how old are you and how close/far away from retirement? Personally, if your going to keep allocating to Smalls, I'd just leave the initial balances where they are and change future contributions.
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arcticpineapplecorp.
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Re: Small cap lagging large cap in portfolio

Post by arcticpineapplecorp. »

Gorlow wrote: Wed Jul 03, 2024 1:50 pm
arcticpineapplecorp. wrote: Wed Jul 03, 2024 1:42 pm
Gorlow wrote: Wed Jul 03, 2024 1:30 pm Thank you all for your responses. I now know the difference between rebalancing and asset allocation. My plan doesn’t offer a total market fund but it offers a target date fund. I feel like once I get to an 80/20 split I’ll be more comfortable. I just don’t know if I should rip the band-aid off and reallocate now or wait to see if small cap catches up.
why not use a target date retirement fund?

if you say you don't want fixed income, at what point do you think you might? And then fixed income should be in the 401k (and stocks in Roth IRA and taxable) when possible to be tax efficient.
The expense ratio is much higher and both the large and small cap funds have vastly outperformed the target date fund.
they've only outperformed because you're comparing apples to oranges.

1. large and small cap stock funds are US stocks
2. target date fund contains US stocks, International stocks, US bonds and International bonds

if/when US stocks outperform international stocks and/or bonds, #1 will outperform #2.
When stocks underperform bonds, #2 will outperform #1.

what's the difference in expense ratios

and more important, do you think the problem is only solved by going from 50/50 large/small to 80/20?

If so, what happens if your 80/20 large/small goes to 90/10 large/small?

will you sell large and buy small even if it underperforms which is what would happen if you go from 80/20 to 90/10?
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Chuckles960
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Re: Small cap lagging large cap in portfolio

Post by Chuckles960 »

Gorlow wrote: Wed Jul 03, 2024 1:30 pm Thank you all for your responses. I now know the difference between rebalancing and asset allocation. My plan doesn’t offer a total market fund but it offers a target date fund. I feel like once I get to an 80/20 split I’ll be more comfortable. I just don’t know if I should rip the band-aid off and reallocate now or wait to see if small cap catches up.
Just be prepared to see large caps tank within weeks of your going to 80/20.

NVidia is rather high, and while no one can say it won't go higher, one can say (in the usual wishy-washy language used by financial columnists) that it may be overpriced and there is significant downside risk. If/when it goes down, it will drag the entire market down with it, but small caps may not drop as much because they have not gone up as much.

In short, while market timing is against the dominant religion here, it is probably not the best time to put money into large caps. Personally I am reducing my exposure, slowly.
Topic Author
Gorlow
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Re: Small cap lagging large cap in portfolio

Post by Gorlow »

Nubomb wrote: Wed Jul 03, 2024 2:05 pm
Curious how old are you and how close/far away from retirement? Personally, if your going to keep allocating to Smalls, I'd just leave the initial balances where they are and change future contributions.
I’m 39. This is the approach I’m leaning towards.
Nubomb
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Re: Small cap lagging large cap in portfolio

Post by Nubomb »

Gorlow wrote: Wed Jul 03, 2024 2:25 pm
Nubomb wrote: Wed Jul 03, 2024 2:05 pm
Curious how old are you and how close/far away from retirement? Personally, if your going to keep allocating to Smalls, I'd just leave the initial balances where they are and change future contributions.
I’m 39. This is the approach I’m leaning towards.
Just some perspective. I never really tinkered with my 401K and have been at it for 25 years. Pleasantly surprised with the outcome now that I'm almost 50. I started 50/50 and stayed that way for the longest time. I have since diversified a bit with NEW contributions. I'm now 55 Large and 30 Small, rest in RIET and International. I do plan to rebalance into Bonds to reduce some risk but that is another topic.

If I believe my plan information, Life of my funds have returned 10.2% Annualized for Large and 9.7% for Small. I'm not really sure what it bought me in terms of diversity but I'll take it..
rule of law guy
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Re: Small cap lagging large cap in portfolio

Post by rule of law guy »

brightlightstonight wrote: Wed Jul 03, 2024 11:38 am
rule of law guy wrote: Wed Jul 03, 2024 9:56 am I have posted before how large cap should beat out small cap as technology becomes a greater driver of returns. especially with AI penetration, which will occur early for large cap. later (and less) for small cap.
I would think that history suggests rather the opposite. In technological booms (railroads, electricity, internet, etc.), the common pattern is:

1. A small number of huge winners (which are exceedingly difficult to predict beforehand)
2. A large number of bubble companies which collapse when the bubble does (the timing of which is only obvious in the rearview mirror)
3. Commodification of the underlying technology, reducing profits of the huge winners
4. A large win for users of the technology after the bubble (which is why you really really want to own the market, since you've no idea which companies are going to successfully use the technology and which won't)

"Technology" isn't something that's just emerged as a force this decade - we've got 180 years of history to look back on! I wonder if #3 truly holds this time around - there do seem to be some reasons why firms like Amazon can effectively print money, but I see zero reason to think Nvidia, Alphabet, Microsoft, etc. truly have a lock on things. (Intel seemed to, until it didn't; Microsoft spent a decade down, and I couldn't have predicted it would come back as well as it has.)

(Plus, trees don't grow to the sky.)
1. I can predict that the small number of huge tech winners will either be in, or will be included in, SPY. SPY is cap weighted, so successful tech companies are all going to be represented in SPY (at least at some point). no guesswork involved.

2. bubble companies will likely collapse before inclusion in SPY. there are exceptions: see Cisco.

3. small cap companies are largely users of tech, not sellers. tech for them is a cost, not a revenue item.

4. the bigger your company, the more you can used the tech given bigger Capex budget. small cap companies will eventually incorporate tech when costs comes down, usually a dollar short and a day late.
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ApeAttack
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Re: Small cap lagging large cap in portfolio

Post by ApeAttack »

Gorlow wrote: Wed Jul 03, 2024 2:25 pm
Nubomb wrote: Wed Jul 03, 2024 2:05 pm
Curious how old are you and how close/far away from retirement? Personally, if your going to keep allocating to Smalls, I'd just leave the initial balances where they are and change future contributions.
I’m 39. This is the approach I’m leaning towards.
I was your age when I stumbled onto this site and started to think about what AA I could set-and-forget. It took me many months to figure it out as I kept learning new things about personal finance and the history of stock and bond performance.

Ultimately, I went from being 100% S&P500 before BH, to being 90:10 (stock: bond) with 25% of my stock being ex-US. I'm much more diversified now, but I'm always going to be disappointed with part of my portfolio (ex-US especially recently). This plan works for me and is based on a lot of reflection. I think I can stick with it for a very long time.

You have a lot of time to learn and make a more informed decision about your AA... There's no need to make a quick decision. Waiting another month or two probably won't make much difference in the end.
May all your index funds gain +0.5% today.
brightlightstonight
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Re: Small cap lagging large cap in portfolio

Post by brightlightstonight »

rule of law guy wrote: Wed Jul 03, 2024 4:21 pm
brightlightstonight wrote: Wed Jul 03, 2024 11:38 am
rule of law guy wrote: Wed Jul 03, 2024 9:56 am I have posted before how large cap should beat out small cap as technology becomes a greater driver of returns. especially with AI penetration, which will occur early for large cap. later (and less) for small cap.
I would think that history suggests rather the opposite. In technological booms (railroads, electricity, internet, etc.), the common pattern is:

1. A small number of huge winners (which are exceedingly difficult to predict beforehand)
2. A large number of bubble companies which collapse when the bubble does (the timing of which is only obvious in the rearview mirror)
3. Commodification of the underlying technology, reducing profits of the huge winners
4. A large win for users of the technology after the bubble (which is why you really really want to own the market, since you've no idea which companies are going to successfully use the technology and which won't)

"Technology" isn't something that's just emerged as a force this decade - we've got 180 years of history to look back on! I wonder if #3 truly holds this time around - there do seem to be some reasons why firms like Amazon can effectively print money, but I see zero reason to think Nvidia, Alphabet, Microsoft, etc. truly have a lock on things. (Intel seemed to, until it didn't; Microsoft spent a decade down, and I couldn't have predicted it would come back as well as it has.)

(Plus, trees don't grow to the sky.)
1. I can predict that the small number of huge tech winners will either be in, or will be included in, SPY. SPY is cap weighted, so successful tech companies are all going to be represented in SPY (at least at some point). no guesswork involved.

2. bubble companies will likely collapse before inclusion in SPY. there are exceptions: see Cisco.

3. small cap companies are largely users of tech, not sellers. tech for them is a cost, not a revenue item.

4. the bigger your company, the more you can used the tech given bigger Capex budget. small cap companies will eventually incorporate tech when costs comes down, usually a dollar short and a day late.
1. Is certainly true during a bull market (or a bull market preceding a bubble). And no one (I hope) is saying "SPY is a bad investment" - it's 25% of my overall portfolio, and significantly more than any small-cap portion (though I have a tilt towards small relative to market cap). The point isn't "large-cap bad, small-cap good" it's "both are good".

2. This is cherrypicking, and false. Take a look at INTC (Intel), *still* not back to its 2000 peak. (Admittedly, if you'd reinvested dividends, you would have a small nominal gain by 2018, but still no real gains.) Obviously, *this* is cherrypicking too, but the notion that "huge tech winners predictably thrive beyond bubbles" (in the sense of "they continue to be excellent investments in the long term) is wrong. Obviously, SPY has done fantastically this last decade, but the notion that this is always true "because technology" is a dangerous one. SPY's real returns were zero for thirteen years from the 2000 peak!

History is important. Arguments that *this* time technology is totally different, and benefits will accrue only to large-cap, should be taken with caution. (As should the argument that history is unchanging, of course, but no one is arguing "small-cap is always better at all times".)

3. This doesn't make sense. Yes, it's a cost, but (successful) businesses don't just "spend" money, they do it on the belief that they will earn a solid return on that expense. Do you think the internet was just an expense to small-cap firms? If large-cap firms are successfully selling technology to other firms, then those firms are using it to grow their businesses. And if a large-cap firm is printing money selling novel technology, why don't you think someone else will take them on and drive down prices (and profits) - something which has happened for every other technology company throughout history?

4. Small-cap isn't that small - we're talking $250m to $2b market cap. (And if you think megacap companies are fantastically efficient and nimble, well, work at one someday... they're not, guess how I know?)
heyyou
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Re: Small cap lagging large cap in portfolio

Post by heyyou »

This was written yesterday, and has now been supplanted by a more articulate posting.

At the OP: Whatever you choose, some other path will soon perform better. That is just how we are finally rewarded as long term, total index investors, we have tolerated our own continuous under-performance as each hot sector shined for some short period.

Note how publications need to have attention-getting lead articles. "If it bleeds, it leads," has been said about newspaper headlines. Now the same is true for attracting attention to websites, so any recent hot sector performance will continue to be touted in 21st century media.

Note how few active fund managers other than Warren Buffett, have long term returns higher than index investors (after fund costs). Yes, there are hot niches but who are the active managers who steadily outperform the indices by a few percent for two decades, not those stock pickers who once picked a few hot IPOs then guessed wrong for the next decade?
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David Jay
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Re: Small cap lagging large cap in portfolio

Post by David Jay »

brightlightstonight wrote: Wed Jul 03, 2024 11:38 am "Technology" isn't something that's just emerged as a force this decade - we've got 180 years of history to look back on!
To amplify (in reverse order):
Smart phones
Cell phones
Personal Computers
Portable electronics (Cassette and CD)
Mainframe Computers
Transistors
Aircraft
Big 3 automotive
Gasoline retailers
Electric power
Telephone
Telegraph
Railroads
Kerosene
Steam engines

In each category it is easy to name the companies who dominated and are gone (Blackberry, Compaq, Sony, Burroughs...)
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
intendi
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Re: Small cap lagging large cap in portfolio

Post by intendi »

Gorlow wrote: Wed Jul 03, 2024 1:30 pm Thank you all for your responses. I now know the difference between rebalancing and asset allocation. My plan doesn’t offer a total market fund but it offers a target date fund. I feel like once I get to an 80/20 split I’ll be more comfortable. I just don’t know if I should rip the band-aid off and reallocate now or wait to see if small cap catches up.
I can relate with struggling to time the market (even though we know we shouldn't do that). I tend to buy things when they are on sale and have been seriously tempted to sprinkle in a little SCV.

I ultimately went with a target date fund in my retirement account to protect me from myself.
LotsaGray
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Re: Small cap lagging large cap in portfolio

Post by LotsaGray »

Invest don’t trade. A qtr is meaningless in the long run. If you felt half and half was good diversication why change now based on a single qtr? Now if you have other reason to change your mind on small cap as investment, move your money.

I will say one of the biggest mistake people make is they will have an idea, buy a stock or fund aligned with that idea then when that investment doesn’t pay off immediately and in fact declines, they bale. So an investment that might have been very good idea in the long run becomes a loser because someone decided to trade instead of invest.

Ime, picking stocks likely to go up is not the hard part. Trying to pick not only what is good but when it will be good and being patient. The even harder part for me was often knowing when it was no longer a good investment.
BirdFood
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Re: Small cap lagging large cap in portfolio

Post by BirdFood »

Gorlow wrote: Wed Jul 03, 2024 1:30 pm Thank you all for your responses. I now know the difference between rebalancing and asset allocation. My plan doesn’t offer a total market fund but it offers a target date fund. I feel like once I get to an 80/20 split I’ll be more comfortable. I just don’t know if I should rip the band-aid off and reallocate now or wait to see if small cap catches up.
If the target date fund doesn't have a ridiculous expense ratio, I think it might be wisest to just put everything in that. (Assuming this is tax-deferred.) You should be able to read the information about it and see what its equities/fixed income allocation. If you want to be less aggressive, you could choose a fund for a sooner year. If you want to be more aggressive, you could choose one for a more distant year. But then you can just leave your money alone and know that it's being allocated according to some moderately accepted model, and slowly shifting more conservative as you age.

(You could also post its name, if you haven't already, and people could tell you whether they regard it as a sensible fund or not.)
retireIn2020
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Re: Small cap lagging large cap in portfolio

Post by retireIn2020 »

livesoft wrote: Wed Jul 03, 2024 10:00 am Today July 3, 2024, US large-cap is lagging small-cap AND international and bonds. What is going on!!??
I like to call it Yin and Yang. :D
Some call it market cycles.
Some call it diversification.

At the end of the day, it's just balancing risk. Nobody knows when but if interest rates go down, mid and small cap will outshine large cap.

It's just a matter of patience in my mind. As far as the 7/3/2024 large cap lagging small and international, look no further that the fed chair's comments just prior to that very day.
Federal Reserve Chair Jerome Powell expressed satisfaction Tuesday with the progress on inflation over the past year but said he wants to see more before being confident enough to start cutting interest rates.

“We’ve made quite a bit of progress and in bringing inflation back down to our target,”
https://www.cnbc.com/2024/07/02/powell- ... tting.html

To the OP, patience is your friend.

To livesoft, I know you were being flippant, I'm just adding clarity to your comment.
https://www.merriam-webster.com/dictionary/abide
BitTooAggressive
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Re: Small cap lagging large cap in portfolio

Post by BitTooAggressive »

Gorlow wrote: Tue Jul 02, 2024 9:00 pm
arcticpineapplecorp. wrote: Tue Jul 02, 2024 7:54 pm
tibbitts wrote: Tue Jul 02, 2024 7:38 pm
Gorlow wrote: Tue Jul 02, 2024 6:42 pm I am 50% invested in large cap and 50% small cap for my 401(k). The crazy difference in return the last quarter has me nervous and wanting to rebalance my portfolio. I don’t want to rebalance now and accept a loss but I’m worried it will get worse. What should I do?
If you rebalance you'll be moving gains from large cap to small cap; I don't see how that's accepting a loss?
s/he's worried about a future loss after s/he rebalances. It's called market timing what the OP is trying to do ("I won't rebalance now because I'm afraid the thing I've rebalanced into will go down after that!"...then you know what happens sometimes...you missed your opportunity to buy low because while you were on the sidelines the thing that you thought was going to down went up instead :oops: )
No, I’m worried about present loss because what I’m considering doing is selling the majority of my small cap and putting it into large cap out of fear that the small won’t ever catch up. I appreciate all the insight so far and you all have made some good points.
Most people should be in total market funds because they can’t tolerate deviation from some benchmark. I think you fit into that category. Holding the total market only is fine.
monkeytoad
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Re: Small cap lagging large cap in portfolio

Post by monkeytoad »

livesoft wrote: Wed Jul 03, 2024 10:00 am Today July 3, 2024, US large-cap is lagging small-cap AND international and bonds. What is going on!!??
Don't worry, July 5th fixed it back with a vengeance.
Just trying to stay the course
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Re: Small cap lagging large cap in portfolio

Post by tibbitts »

BitTooAggressive wrote: Fri Jul 05, 2024 6:11 am
Gorlow wrote: Tue Jul 02, 2024 9:00 pm
arcticpineapplecorp. wrote: Tue Jul 02, 2024 7:54 pm
tibbitts wrote: Tue Jul 02, 2024 7:38 pm
Gorlow wrote: Tue Jul 02, 2024 6:42 pm I am 50% invested in large cap and 50% small cap for my 401(k). The crazy difference in return the last quarter has me nervous and wanting to rebalance my portfolio. I don’t want to rebalance now and accept a loss but I’m worried it will get worse. What should I do?
If you rebalance you'll be moving gains from large cap to small cap; I don't see how that's accepting a loss?
s/he's worried about a future loss after s/he rebalances. It's called market timing what the OP is trying to do ("I won't rebalance now because I'm afraid the thing I've rebalanced into will go down after that!"...then you know what happens sometimes...you missed your opportunity to buy low because while you were on the sidelines the thing that you thought was going to down went up instead :oops: )
No, I’m worried about present loss because what I’m considering doing is selling the majority of my small cap and putting it into large cap out of fear that the small won’t ever catch up. I appreciate all the insight so far and you all have made some good points.
Most people should be in total market funds because they can’t tolerate deviation from some benchmark. I think you fit into that category. Holding the total market only is fine.
Holding the "total market" would be fine, but then you get into what benchmark to use for the "total market." US-market-cap-weight is only one of infinite choices. Maybe world market-cap weight? The problem I see is that whatever benchmark/index the OP chooses, it's virtually assured of not being the best-performing at some point going forward, so will the plan then be to switch to whatever has performed best in recent retrospect?
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nedsaid
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Re: Small cap lagging large cap in portfolio

Post by nedsaid »

Gorlow wrote: Tue Jul 02, 2024 6:42 pm I am 50% invested in large cap and 50% small cap for my 401(k). The crazy difference in return the last quarter has me nervous and wanting to rebalance my portfolio. I don’t want to rebalance now and accept a loss but I’m worried it will get worse. What should I do?
Nothing.

During market history sometimes Large Stocks will outperform Small Stocks and sometimes Small Stocks will outperform Large Stocks. We see this with Growth vs. Value and US vs. International. Small Caps day will come, just be patient. Selling low and buying high is not a prescription for investing success.
A fool and his money are good for business.
nguy44
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Re: Small cap lagging large cap in portfolio

Post by nguy44 »

arcticpineapplecorp. wrote: Wed Jul 03, 2024 7:19 am
Wannaretireearly wrote: Tue Jul 02, 2024 10:30 pm Where’s the Callan table when we need it ;)
right here at the wiki:

https://www.bogleheads.org/wiki/File:Ca ... eturns.png
Here is a more current version (includes returns for 2023): https://www.callan.com/research/2023-cl ... dic-table/#

To the OP, I cannot add much to what others have said, other than, from my experience, worrying about quarterly results in a 401K at age 39, when you will be investing into that 401K for at least 20+ more years, is probably sort sighted. I started my 401K at age 26 in 1984, and always kept it to 4 funds: large cap, small/mid cap, international, and stable value. I am now 66. If every"strange" one quarter of returns caused me to react, I would be locked away in a straight jacket today, and likely not have been able to retire 6 years ago. I almost always rebalanced only once a year to keep to my desired AA. in truth, at times a severe lag by one sector would more likely tempt me to balance into that sector, not our of it, as I was looking at the long term (a la the Callan table).

I'd say determine your AA that lets you sleep well at night and stick with it. My rule of thumb is, picture the return of either Large or Small Cap falling by 50%. Would the level that would leave you at concern you? If so, you have too much invested in that sector to start with. If you will never be comfortable when one sector strongly outperforms another, best to just buy a total market fund, or a target date fund that has the AA you desire.
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Re: Small cap lagging large cap in portfolio

Post by Atgard »

id0ntkn0wjack wrote: Tue Jul 02, 2024 9:39 pm What lead you to invest in small cap in the first place? Large caps have more than doubled the returns of small caps over the past decade.

Now, a contrarian might say that large caps are over valued and now is the perfect time for a SCV tilt.

Who knows? One day the contrarian might be right.
I am old enough to remember many here talking about the "SCV premium" as if it were a law of the Universe (or at least part of the Efficient Frontier separate from VTI) and many did SCV tilts.

All more evidence that making predictions is hard (especially about the future!) and chasing past performance rarely ends well.
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Re: Small cap lagging large cap in portfolio

Post by tibbitts »

Atgard wrote: Fri Jul 05, 2024 2:58 pm
id0ntkn0wjack wrote: Tue Jul 02, 2024 9:39 pm What lead you to invest in small cap in the first place? Large caps have more than doubled the returns of small caps over the past decade.

Now, a contrarian might say that large caps are over valued and now is the perfect time for a SCV tilt.

Who knows? One day the contrarian might be right.
I am old enough to remember many here talking about the "SCV premium" as if it were a law of the Universe (or at least part of the Efficient Frontier separate from VTI) and many did SCV tilts.

All more evidence that making predictions is hard (especially about the future!) and chasing past performance rarely ends well.
That's true, but much of the talk about SCV came after cap-weighting didn't work out so well during the tech wreck. Now we have lots of people who think cap-weighting rules... as long as it's domestic-only cap weighting. So really cap-weighting is just one approach, and not even the "default" approach for many Bogleheads.
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Re: Small cap lagging large cap in portfolio

Post by BitTooAggressive »

tibbitts wrote: Fri Jul 05, 2024 2:29 pm
BitTooAggressive wrote: Fri Jul 05, 2024 6:11 am
Gorlow wrote: Tue Jul 02, 2024 9:00 pm
arcticpineapplecorp. wrote: Tue Jul 02, 2024 7:54 pm
tibbitts wrote: Tue Jul 02, 2024 7:38 pm
If you rebalance you'll be moving gains from large cap to small cap; I don't see how that's accepting a loss?
s/he's worried about a future loss after s/he rebalances. It's called market timing what the OP is trying to do ("I won't rebalance now because I'm afraid the thing I've rebalanced into will go down after that!"...then you know what happens sometimes...you missed your opportunity to buy low because while you were on the sidelines the thing that you thought was going to down went up instead :oops: )
No, I’m worried about present loss because what I’m considering doing is selling the majority of my small cap and putting it into large cap out of fear that the small won’t ever catch up. I appreciate all the insight so far and you all have made some good points.
Most people should be in total market funds because they can’t tolerate deviation from some benchmark. I think you fit into that category. Holding the total market only is fine.
Holding the "total market" would be fine, but then you get into what benchmark to use for the "total market." US-market-cap-weight is only one of infinite choices. Maybe world market-cap weight? The problem I see is that whatever benchmark/index the OP chooses, it's virtually assured of not being the best-performing at some point going forward, so will the plan then be to switch to whatever has performed best in recent retrospect?
You might be correct. Everyone eventually needs to settle on a portfolio. If they don’t constantly switching a good portfolio to find the perfect will make you miserable and probably lead to being worse off than sitting in a good enough portfolio.
stocknoob4111
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Re: Small cap lagging large cap in portfolio

Post by stocknoob4111 »

It's the Mag 7 distorting the S&P 500, compared to S&P 500 equal weight small caps are not far behind and compared to S&P 493 they are almost even
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