Don’t be swayed by a cherry-picked depiction of history.
Many market commentators agree there is a clear discussion about the performance comparison between the S&P 500 and U.S. small-cap value stocks. That’s why many investors have been lured by the shiny-object stocks of the S&P 500 index.
Their recent performance since 2010 has been quite impressive. The large-cap S&P has outperformed US small-cap value stocks by an annualised 1.7 percentage points. However, this attractive period for the S&P was quickly followed by the “lost decade” (January 2000–December 2009), when the index returned -0.9%, lagging more than 13 percentage points behind US small-cap value stocks.
The importance of the entire data history
It is crucial to use the entire data history to gain perspective. Since June 1927, US small-cap value stocks have outperformed the S&P, 13.1% to 10.1%. The complete sample also portrays the subperiods as anomalies for the S&P 500. Outperforming small-cap value stocks over 14 years and returning less than zero over ten years are both unlikely expectations for the long term.
The consistency of small-cap value stocks
In contrast to the S&P 500, small-cap value stocks have shown more consistency in these subperiods. This illustrates the importance of looking at the entire picture rather than being swayed by a cherry-picked depiction of history.
In conclusion, making informed decisions in stock investment requires comprehensive information. Avoid the trap of cherry-picking and ensure you have the complete history before moving. Therefore, investors should be mindful of these trends when making investment decisions.
Ready to secure your financial future with GSB Capital?
Investing is more than just a financial decision; it’s about securing your future. At GSB Capital, we believe in creating and maintaining an investment strategy that aligns perfectly with your short and long-term objectives.
But how do we do it?
Our initial financial planning meeting is where we start. Here, we focus on identifying your goals, understanding your needs, and laying out a plan that’s easy for you to grasp.
What sets us apart?
Our advisers are more than just fully qualified and experienced; they’re also friendly, approachable and ready to guide you through every step of your investment journey.
Ready to secure your future?
Contact our GSB Capital team today, and let’s turn your financial dreams into reality. Act now because your future won’t wait!
THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.
THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP AND YOU MAY GET BACK LESS THAN YOU INVESTED.
THE TAX TREATMENT IS DEPENDENT ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.