Small-Cap Value: What Could Go Wrong?

This podcast was produced with an accompanying slideshow. Listen and watch here: Small Cap Value: What Could Go Wrong. Paul examines the historical and possible future risks and returns of small-cap value stocks as an asset class to help you determine its role in your portfolio – whether a young investor, in your working years, or a retiree. …

This podcast was produced with an accompanying slideshow. Listen and watch here: Small Cap Value: What Could Go Wrong. Paul examines the historical and possible future risks and returns of small-cap value stocks as an asset class to help you determine its role in your portfolio – whether a young investor, in your working years, or a retiree. Referenced are additional articles and tables on small-cap value you’ll find at https://paulmerriman.com/all-about-small-cap-value/, specifically the All Value Equity Portfolio article, the 2-4 Fund Combo Tables, and Asset Class Comparisons table.

Basic Terms defined: 
 
Asset classes - These are different types of investments that can be grouped in a category, such as equities, bonds, cash, real estate. Among investment equities, a diversification of asset classes is recommended to minimize risk of loss. These include international and domestic (US), large cap (big companies), mid cap (medium-size companies) and small cap (small companies). Mutual funds and Exchange Traded Funds (ETFs) bundle dozens or hundreds of equities of different companies to make it easier for an investor to diversify.
CRR - Compound Rate of Return
Equities - Another name for stocks, or owning a piece of a company
Growth, Value  and Blend- Another subset of Asset Classes, Growth refers to companies whose stock is expensive relative to earnings but investors think the price is justified by high potential for future growth. Value refers to stock that is low priced relative to earnings and dividends and the company’s stock price is expected to remain fairly stable and therefore not as risky as Growth. Blend is a combination of both.
Premium - A premium refers to the amount above face value that you pay to buy an investment, or you receive from selling it.
Small-Cap Value – This refers to small companies ($1.5 billion to $3 billion in market value) that have relatively low price-to-net worth ratio or low price-to-earnings ratio.