| Search by tag or site | Login to my blog ? Start my own blog |
 |
Millionaire Now! by Larry NusbaumThis blog is based on the organizational principles found in my new book, "Millionaire Now! - A Financial Toolbox with Seven Steps to Wealth". |
DO YOU HAVE TOO MUCH IN LARGE CAPS?
http://www.millionairenowbook.blogspot.com/
According to the Investment Company Institute, 41% of all ETF money is in large cap sectors and 7% of all ETF money is in small cap sectors! What that tells us is that investors are not taking full advantage of the opportunity to diversify by using ETFs and that performance may suffer as a result. It also suggests that lack of better diversification, with so much in large caps, may wind up actually hurting investors as it did in 2001-2003.
Here are some fascinating statistics that can help one asset allocate by style:
Small Cap Value returns from 1927-2004: 14.7%
Micro Cap returns from 1927-2004: 13.0%
Large Cap Value returns from 1927-2004 : 11.7%
Large Cap Growth returns from 1927-2004: 9.5%
This tell us that Large Cap Growth companies are too large and too mature. Next, the risk premiums, over the long term, to achieve a better rate of return, goes down when you invest in value funds within the Small Cap Sectors. Next, a portfolio of 60% S&P 500 index and 40% Lehman Bond index from 1973-2004 will return an annual return of 10.4%. If you change the mix to 30% S&P 500 index, 40% Short-term Bonds and 30% US Micro Cap the return goes up to 11.8% per year. Now, if you further diversify into 30% to International (small and large and emerging), and 30% into US (small value and large value and S&P 500) the return goes to 13.1% per year with less risk than the first two portfolios.
According to Fidelity:
The key to long-term success can lie in a diversified portfolio - neither all stock funds, which may pose too much bear market risk, nor all bond funds and cash, which provide little potential for growth. Too often, the fear of being caught in a down market causes some investors to err on the side of caution - and they end up reducing their stock holdings.
- Canslim.net Morning Comment And Links (for Traders)
- Stocks Fail To Turn Up; Sec's Shorting Ban On Financial Shares Expires
- Nasdaq Technical Picture - Fresh Multi-year Lows
- Your Homes Are Better Than Your Paper
- What Does The Market Meltdown Mean To You?
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- July 2006
- Millionaire Now!
- The 7 Steps to Millionaire Now!
- Build Your Financial Plan
- RETIRE RICH: Survival Guide
- ASSET ALLOCATION MODEL
- THE BIG ROLLOVER IS HERE
- THE END OF THE GRAND SUPERCYCLE?
- Trader X
- Real Estate Marketing Blog
- Alpha Trends
- Finance Professor
- Random Roger's Big Picture
- The Boston Condo Blog
Made several great trades today. Traded the QID, QQ [read more]
When I first started Day Trading I traded anything that [read more]
Today we have the Fed speaking and release of Fed mi [read more]
<< My Home | TheMoneyBlogs Home