The Investment Scientist

Small Cap Value vs Large Cap Growth

Posted on: August 17, 2013

ImageIf you are a typical investor, given the choice between investing in a small cap value fund or a large cap growth fund, which one would you choose?

You would probably go with the large cap growth since “large cap” sounds a lot safer than “small cap,” and “growth” sounds a lot more promising than “value.”

To prove how wrong you are, I did a study of the relative performances of these two styles in the eight decades between 1931 and 2010. Here is what I found.

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Decade

Small Cap Value

Large Cap Growth

1931 – 1940

15.53%

9.51%

1941 – 1950

28.18%

12.09%

1951 – 1960

13.39%

12.47%

1961 – 1970

14.22%

5.09%

1971 -1980

15.24%

4.87%

1981 – 1990

14.10%

13.43%

1991 – 2000

17.82%

14.04%

2001 – 2010

9.92%

3.25%

Can you believe your eyes? There is not a single decade when large cap growth outperformed small cap value.

If your stock investment is mostly in glamourous large cap growth stocks (just like most advisors do to their clients,) you are not getting all that the market has to offer. You need to order a 2nd opinion review with me.

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



You may also get his monthly newsletter, or join his Facebook page for regular wealth management insights. Michael's email is info[at]mzcap.com.

Twitter: @mzhuang

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