I performed a little bit of Internet research and discovered that between 1926 and 2004, Large cap Growth stocks had an average annual return of about 9.26%. Accordingly, $10,000 invested in Large Cap Growth stocks in 1926 would have grown to about $10 million by 2004. That's not too shabby. However, it pales in comparison to the astonishing 15.9% annual return of Small Cap Growth stocks over the same time period. $10,000 invested in Small Cap Value stocks in 1926 would have grown to about $1 billion by 2004!
Here's an illustration of these returns that was in the New York Times last year:
For those interested in investing in Small Cap Value stocks, I recommend the Vanguard Small Cap Value index fund (symbol: VISVX) or the corresponding Vanguard ETF (symbol: VBR).
2 comments:
Is there any reason to invest in small cap stocks if already invested in VTI? They have a correlation coefficient of around 0.98 so I don't see the point as a long-term investor.
^^^Anonymous, you could invest directly in VTI. However, small caps comprise a very small % of VTI. I don't know the actual makeup of VTI, although I suspect that small caps may only comprise maybe 3 or 4% of VTI. You should invest in a separate small cap index fund if you want to overweight small caps.
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