Swing in Small Value Stocks Shows Benefits of Staying the Course
Value stocks, or those with low relative prices, have outperformed higher-priced growth stocks in the US over the long term. Similarly, the stocks of smaller companies have fared better than the stocks of bigger ones in the US. But the performance of these stocks has varied at different points in history.
As the global pandemic rocked markets in March 2020, large growth stocks outdid small value stocks by 19.6%,
the greatest monthly margin on record. From March through September, the large growth index beat small value by
a cumulative 38%.
But history has shown that a disappointing period for
a premium can be followed by a quick turnaround,
and that’s what happened beginning in October 2020. Through March 2021, the small value index saw its own noteworthy outperformance: 63% over that span, among the best stretches since the 1920s. (3)
History hasn’t presented a reliable way to predict when small value stocks will outperform. Swings can be swift and sharp—staying invested is the best way to capture expected gains over the long term.
Your financial future is too important to be left to chance. By utilizing an Evidence-Based Investment approach, the team at Cogent Strategic Wealth is about implementing the great ideas in finance for our clients, not speculation.
Your portfolio is no doubt an important driver of your overall financial plan. In response, we start and end with evidence. Our approach is guided by more than 60 years of objective, peer-reviewed research on how markets work.
The strategies in your investment plan are risk-optimized, cost-effective and tax-efficient to enhance your odds of living the life you’ve imagined.
Life is uncertain. The market is even more precarious. This means building wealth has no shortcuts. Success requires a solid investment approach, a long-term perspective, and discipline to stay the course. Instead of leaving your financial future to chance, you need to have a plan.
Cogent Strategic Wealth is here for you.
So, instead of worrying about your future, why not take positive steps to protect it? Set up a Cogent Conversation with us today. We’ll show you how to transform your hard work into durable wealth even through troubling markets.
1. Small value minus large growth is the monthly return difference of the Fama/French US Small Value Research Index minus the Fama/French US Large Growth Research Index.
2. Cumulative outperformance over period.
3. Index data begin July 1, 1926.
Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
Note: From July 1, 1926, through March 31, 2021, the Fama/French US Value Research Index outperformed the Fama/French US Growth Research Index by 2.84 percentage points on an annualized basis. The Fama/French US Small Cap Research Index outperformed the Fama/French US Large Cap Research Index by 1.83 percentage points on an annualized basis over that period.
The opinions expressed by featured authors are their own and may not accurately reflect those of Cogent Strategic Wealth®. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice. By clicking on any of the links above, you acknowledge that they are solely for your convenience, and do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-party Web sites. We are not responsible for the content, availability or privacy policies of these sites, and shall not be responsible or liable for any information, opinions, advice, products or services available on or through them.
© 2021, Dimensional Fund Advisors