That was just an example of a fund that was allowed to grow plenty, which was the question in the OP. But considering there is a market cap limit on small caps, they will never grow to be more than a quarter or half percent of the small cap fund holding. This limits the impact a single stock can have on the fund, for better or worse. Really the fund does well when on average most of the stocks go up, not a few outsized winners.My point was only that despite the heroic growth of SMCI over the last 2 years, the small cap fund didn't keep up with the market. So even though you would have held more SMCI while it has grown in VB than VTI. VB still didn't match the market return. So there must have been a bunch of turkeys in there too.You aren't wrong, but if you look at how most people invest the results are much more boring. Most people don't invest 1x and let it ride for 40 years. They invest small amounts on a regular basic. If we go back and simulate putting $200 a month like a 401k deposit, they are much closer. And if you use the realistic scenario of having a mix of both, they are closer again.Here's as far as back as I was able to get Portfolio Visualizer to compare Vanguard small-cap and S&P 500 funds: https://www.portfoliovisualizer.com/bac ... 5h3afjxzwh
From 1985, small-caps are... lagging. They did better in the wreckage of the dot.com bubble, but cumulatively haven't exactly shined over the past almost-30 years.
https://www.portfoliovisualizer.com/bac ... e3ITA1eanT
Timing is also important. As recently as 2018, Small cap was ahead by 10% overall. And what is the significance of the inception date of these funds. I did not start investing in 1985. Did you?
I'm not necessarily pushing small caps. But it's just crazy to me that everyone uses charts after a crazy 5 year run by mega caps to prove that nothing else makes sense.
There will be times small cap beats the market, and other times it lags. Historically there was a premium. More recently, not so much. The future? Who knows?
As far as looking at backtests investing small amounts on a regular basis, I agree it mirrors real investors better. Differences between any approach will be washed out by the continued deposits, so the absolute difference between 2 funds in a backtest will be less. This is one of the reasons phrases like "the lost decade" of the 2000s don't really resonate with me as an accumulator. If you kept on buying almost diversified strategy small or large, during that decade, you did great, despite the dot com crash and the GFC.
Anyway, I don't think SMCI can be long for the small cap index funds. Its joing the big boys in the S&P 500. It will be dropped from the Russel 2000 and other small cap indices, and passive funds tracking the small cap space will have to drop the stock and distribute a capital gain.
Statistics: Posted by the_wiki — Sat Mar 02, 2024 4:56 pm — Replies 23 — Views 2100
