LCG
Sterling Capital Focus Equity ETF
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ICBU DD - This stock may be overvalued currently, but could have a bright future.
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[https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=66fSsagikm4gC30MCakJ5A](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=66fSsagikm4gC30MCakJ5A) Try taking off the logarithmic scale on the growth chart. Years of value outperforming growth back to 1927: [When It’s Value vs. Growth, History Is on Value’s Side | Dimensional](https://www.dimensional.com/us-en/insights/when-its-value-versus-growth-history-is-on-values-side) Dimensional Fund Advisors have the longest track records for actively managed value funds of all market cap sizes. Some of their team left to create Avantis which is owned by American Century. Their funds are structured in nearly the same way. AVUV is an axample of a US SCV fund from Avantis, Vanguard has VIOV and some others which are indexed versions that still seem to outperform LCG or blends.
Much depends on your definition of "aggressive". There are several ... * One common one is simply the ratio of stocks to bonds. If you're in 100% equities, you're being "aggressive" by that definition. * Another one looks at your Asset Allocation. Since, say, Small Cap Value **can** outperform Large Cap under the right conditions, overweighting SCV at the expense of LCG will classified as "aggressive". * Finally, one definition says that "aggressive" means **trying to beat your index**. This group believes that "if you want to be average, buy averages; if you want to track an index, buy indices" -- and if you want to try to beat your index, you have to get OUT of index funds. * Before this gets downvoted to oblivion, also remember this part: If you are SO AFRAID of **under**performing your index, that you are willing to GIVE UP any chance of **out**performing it ... yes, that's "Capital Preservation", which really is a **Conservative** investment strategy. SO, in your case, decide which definition of "Aggressive" you think matches your investment objectives and risk tolerance, and go from there.
Private equity isn't as good as you'd suspect. Have you ever worked for or been a customer of a company that was recently acquired by private equity? If you have, you'll notice they always run it into the ground. But why? Because they see the SP500 doing so well and feel entitled to equally good returns. If they were already getting as good returns with private equity, they would instead be a bit more future-oriented with their prized possession. The real money to be made is still in small-cap value. Valuation spread between SCV/LCG is as big as its ever been. Just gotta be patient AND realize SCV hasnt had bad returns at all since the GFC anyway. US SCV had 9% real and Int'l had 7% real since Jan 2009
If you want to overweight or underweight things then yes it can make sense. For example if you wanted your SCV to come out of LCV but not LCG then you could do something like 10% SCV/ 40% LCV/ 50% LCG. But if you're going to have equal amounts of LCV and LCG then it's just more complicated for no reason.
LCG, dividends and bonds is not the way to take risk tho
Since you don't have an answer yet, you'll have to do with my rant. Look below the funds, at the holdings by asset class. Use Morningstar or any equivalent product to analyse the sectors under the funds: How much do you have in Large-Cap-Growth, how much in Large-Cap-Blend, Mid-Cap-Value, Small-Cap, etc, etc, etc. Line that up against you Asset Allocation Model: How much LCG, MCB, SCV etc do you **want** to have? Bogleheads will want 33/33/33 across three funds; I prefer a 40/30/20/10 model, either Large/Mid/Sm/Internat, or Large/Mid+Sm/Int/Bond; others will have their own preferences. THEN, AND ONLY THEN, do you look at the specific **funds**, and figure out where your overlaps are, and where the gaps are, and which funds are unnecessary (duplicating the assets of others), etc. There's a lot more to it than just a list of ticker symbols.
As you note, the tried-and-true S&P500 index also includes the companies that make up Large Cap Growth funds. The main difference is that instead of the top 10 holdings comprising 30% of the fund value it is 50-55% of the Large Cap Growth, so your exposure is higher. The higher exposure increases the volatility which increases the down side risk and upside reward and the OP wanted to be aggressive. Some LCG funds have higher ERs, like MAFOX in the OPs 401k at 0.77%, but others like VIGAX have an ER of 0.05% which is on par with any good S&P 500 index fund. Technology companies have fueled the stock market gains for the last 15-30 years, but those gains have weathered multiple crashes, Dotcom in 2000, Subprime Mortgage in 2008, Flashcrash in 2011, Quantitative Easing in 2015, Covid in 2020, and Post-Covid in 2022. For people that were in and stayed in they recovered and grew. For people that sold after the drop and stayed on the side lines they lost a great deal. The current group of large cap growth companies are labelled US Domestic, but in reality are global multi-national companies with development, manufacturing and sales in every economy. In my opinion all of them are extremely robust financially (high profit margins with large cash reserves) and have diverse and constantly evolving product lines and diverse customer bases. I think that they can handle almost any storm that comes their way.
You missed the point again. My goal is for better risk-adjusted returns. I want volatility in my assets. The more the better as long as they're uncorrelated. Here's where you can test this allocation: [https://www.portfoliovisualizer.com/backtest-asset-class-allocation](https://www.portfoliovisualizer.com/backtest-asset-class-allocation). Plug in those 4 assets in the % I suggested and compared it to 100% US Stock Market. Tell me what you see. And that site said gold returned 0.78% on an inflation adjusted basis from 1972 to 2023. That would proved one of your point (gold returned less than stocks) yet the portfolio as a whole did better than 100% stocks -- and that's what I'm arguing. Let's face it, if I had suggested 35% LCG, 35% SCV, and 30% intermediate US treasuries, you wouldn't have batted an eye. It's your visceral prior basis against gold that drew you into responding. At least be honest about that. I understand; I used to say no to gold as a part of a diversified portfolio but like I said, I can't argue with results. The strongest argument you can make against what I'm suggesting is that the future will be wildly different than the past. It may very well be. I'm betting it'll be different but similar enough.
Correct. The biggest companies in the USA (the S&P) account for 80% of the market cap of VTI. Full exposure to the market risk premium is acquired by owning the market (essentially VTI). LCG has not been shown to be its own independent risk premium. There are hundreds proposed these days, but the substantial big five are the Market, small cap, value stocks, profitable companies, and reinvestment. The market is the big big factor that shows consistent outperformance and real returns over the risk free asset. The other four main factors have risk premiums in excess of market beta alone, and thus are more volatile with higher expected returns over long run.
Okay so if I'm getting what you're saying correctly, large cap growth is already encompassed in the market's top holdings and since I'm buying a broad based market weighted index fund, I do not have to specifically diversify on the large cap growth additionally. Correct? If so, I thank you very much for your answer because I believe I finally got why I don't actually need to pepper in more LCG ETFs into my portfolio which is kinda redundant. I could just hold more of VTI and increase that LCG more proportionately.
Are you looking specifically for the "growth" factor or do you mean growing your portfolio in a general sense? Those are two different things. While the growth factor has performed well lately, that historically hasn't been the case all the time. QQQM, VUG, and similar funds would be good choices. I'd probably favor VUG since it includes a wider set of large cap growth companies (like financials) that QQQM wouldn't. If you want to increase the expected return, you should consider a combination of growth and value companies. I'd say even going with a large cap growth and small cap value split 50/50. So maybe VUG 50% and AVUV 50%. [Here's a backtest showing the 50/50 LCG/SCV versus QQQ and SP500](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&benchmark=VFINX&portfolioNames=true&portfolioName1=50%2F50+LCG%2FSCV&portfolioName2=QQQ&portfolioName3=Portfolio+3&symbol1=VISVX&allocation1_1=50&symbol2=VIGRX&allocation2_1=50&symbol3=QQQ&allocation3_2=100)
If youve diversified your portfolio using a subasset class approach, into LCG, LCV, MCG, MCV, SCG, SCV, INT G, INT V, EM G, EMV, ST Bonds, LT Bonds, HY Bonds, EM bonds, etc. Then yes. Thats one of the big benefits of MPT. You can keep a consistent risk amount in the portfolio and trim around the baseline allocation. Selling some winners and the parts of the portfolio that are down can recover, your risk stays the same. Its also why ETFs are so great versus individual stocks, you can TLH a subasset class and remain wholly invested. If you just own a collection of securities like most people then there is a much less scientific way of doing it, and depends what you own.
https://imgur.com/a/gG73LCG This was my forecast a couple weeks ago. Long term it's hard to capture all the permutations, admittedly I did this when oil was tanking into the 60's per barrel and it led my forecast lower than I'd be expecting it with this backdrop. Honestly though since I built this everything has been inflationary surprises to the upside. Used cars have shown some resilience, and now energy is rearing its head again. My forecast before this was more like 5.3% this month, and lows closer to 4% than that low of 3.8%. When looking at this the colour would be to expect every point will be higher, but the monthly flows are really interesting. Namely, this months huge drop, which will lead into a flat (panic) number the month after, before two more really big drops and finally a settling out. I believe really strongly in the flow of this line. Again, these numbers are probably 10-30bps too low across the board, but the story will be the same. Do with it what you will!
Hey again, sorry for the delay, this is my newest update (pricing in a very small adjustment down for oil based segments, but I'm not sure I fully buy it yet with the restarting of QE effectively happening). https://imgur.com/a/gG73LCG This is a gross simplification of how it's actually done, but you can see the categories I'm forecasting, and the YoY inflation trend by month + forecast. Down below I included the MoM so you can see which direction and pace I'm expecting most things to go. Most are just kind of humming along but the volatile pieces are food (I have disinflation, rising but the pace of rise slowing). Shelter (disinflation, but you'll note current trend still has it growing at max rate MoM). Fuel and utilities/motor fuel (pricing in MoM drop but then mostly flat and to maintain current levels). Used cars (another 6 months of sharply declining prices there. The part I find most interesting is again that it's Used cars, and Motor fuel which are currently bringing inflation down. The single biggest piece of CPI (shelter) is not only at ATH but still rising at the MoM pace has not slowed and is still like 9-10% annualized. I have that slowing down but that may not happen at all since there's no precedent for that. I need to understand more about fuels and utilities from a component perspective to understand if last months tick down means we're going to keep going that way but you can make your own assumptions from this. The short term correction in energy I'm expecting to turn into a VERY low CPI reading next month of close to 5.2% I'm really excited to see how this gets interpreted against the backdrop here of "Welcome to hyperinflation" now that the FED bailed out the banks and grew their balance sheet. I do think that will be long term inflationary but it simply doesn't happen that fast. I would guess next week Powell raises rates, there will be lots of volatility, and then when the next CPI report prints this low, the market will make a huge fake bull run (play at your own risk). Maybe we even see a rate pause or dare I say a cut. That will be before the reality sinks in around August/Sep when CPI starts rising again and THAT's when we get the big crash we're due for.
I don't think we'll see QE again any time soon, so a turn in the market is not going to have an obvious catalyst. That said I am actually surprised you are relying on a technical indicator given that you sold based on a macro call (I assume). And we're pretty dang close to a golden cross right now: 388 vs 395 on the SPY. OK, we could drill to 300 starting tomorrow. But it wouldn't take much sideways action or a small rally from here to get that golden cross. Are you really ready to pull the trigger if we do? There's still so much negativity in the markets and from your boy Steve Weiss. I think the story of the last year is that all those factor investors were right all along: value beats growth over the long haul. Trying to time the market's gyrations is a lot less appealing (especially considering tax implications of realizing gains) than just focusing on value. Large cap value was basically flat last year if you include divvies, and has now beaten LCG over the last 5 year period, especially if you are still accumulating (since you didn't accumulate at bubble valuations). Since you're sitting in 100% cash, I feel like the move for you is to take a look at portfolio composition, read up on factor investing, and if you believe the evidence, just dump the whole port into funds like SCHD, AVLV, AVUV, AVGE, etc based on personal preferences.
Growth has out performed recently , but who knows if that will happen in the future or not . Also growth is relatively more risky compared to blend and value. If you back test farther with no contributions value and blend perform better. [Large cap vs LCV vs LCG with no contributions](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=1&timePeriod=4&startYear=1972&firstMonth=1&endYear=2022&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&asset1=LargeCapBlend&allocation1_1=100&asset2=LargeCapValue&allocation2_2=100&asset3=LargeCapGrowth&allocation3_3=100) [Large cap vs LCV vs LCG with 6000 annual contributions](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&mode=1&timePeriod=4&startYear=1972&firstMonth=1&endYear=2022&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=1&annualAdjustment=6000&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&asset1=LargeCapBlend&allocation1_1=100&asset2=LargeCapValue&allocation2_2=100&asset3=LargeCapGrowth&allocation3_3=100) Do what you will with that information, but something to note about qqq while recent performance has been really good , it did take 13 years for it to recover from dotcom bubble thats with no contributions. I personally would use something like VTI or voo as core and then you can do a sector bet with qqqm if you really want to.QQQM>QQQ for buy and hold due to being cheaper expense ratio wise.
pretty steep expense ratio hope it can out perform , historically I think LCV has out performed LCG something to keep in mind.
Personally, I have said the same thing when she was shooting the light out... The data supports she will flame out as nearly ALL active managers flame out one way or another. Some just got lucky (being all in in tech same time LCG was hot). Some are great stock pickers, but market impact makes their returns only great in a time weighted vs. dollar weighted POV. The data has ALWAYS been clear that the returns of Mrs. Wood when it was a top quartile performing fund means it will follow by being a bottom quartile producing fund. Jack Bogle wrote about this extensively in "common sense investing" if you want to read about it.
All depends on how much "frame of reference risk" you want to take on and how confident you think it will be worth it in the future. The more you tilt away from sp500 (70% of TSM) the more your returns will look different then the usual tickers that are quoted (DJ and SP). Some folks have a real problem when sticking to the plan when their portfolio results looks a lot different then most others. They start second guessing themselves. Most want to celebrate when others do and share the same misery when it happens. The other aspect is how confident one is believing in mid and small doing better long term. If you believe in efficient enough markets you assume a person investing in small shop down the street deserves to be compensated more due to the higher risk of bankruptcy then one investing in Amazon. Lately, LCG has destroyed everything else last 10 years or so so there is a definite recency bias. However, the last time that happened (1990's) it was followed by a decade of ZERO return of sp500 (2000's). So when everyone is flooding one subasset class is how you get bubbles and then they burst. Many investors advocate (IF you are interested in mixing the two ideas and go 50/50 (TSM/ SCV). This is all personal temperament and beliefs, but whatever you decide you have to STICK with the plan. Don't waffle back and forth.
*Past performance is not indicative of future returns.* That is not from Ben Graham. That is from the SEC. It is a legal disclosure in early 2000's. The story: After a run up of large cap growth stocks (tech) during DOTcom and its subsequent bust there were active funds in early 2000's advertising (paraphrasing) "Look at our excellent 5 year returns as a reason to invest". Of course, a lot of those returns were due to that run up on tech in the few years prior in the late 1990's. That is why the SEC made it legal disclosure on all financial advertising to mention that. They wanted to make sure folks knew that just because an active fund did well in the past it may not in the future. The already knew that most of those funds only did well due to LCG in general doing well and just rode the same wave and not due to any great active management technique. I finally got annoyed one day everyone using this term so casual as it was causing a lot of confusion on the bogleheads site to try to somehow indicate it is in reference to asset class performance, i.e. expecting stocks to do better then bonds going forward because they did in the past. As you can see it has nothing to do with that at all. I had to search the SEC website to find the origins. It is probably the most misunderstood phrase in finance.
Nope. Just read the data. Eugene Fama and Kenneth French published extensive on the value premium (of course it has been around since before Ben Graham in the 1930's). What most call "value" is thinking they can tease out valuations and say, "hey this is undervalued due to x, y, z" that is quite vague and hard to test. Fama/ French 3F model of definition of value which is based on book/ price ratio and that is it (1/3, 1/3. 1/3). It does not use all these other metrics folks love to go on and on about. Even using Fama-French definition of value there are many long stretches 10-20 years value underperforms and some don't accept that either. You can read the excellent presentation of Jack Bogle "Tell Tale Chart" at a Morningstar conference about a decade+ ago talking about it. Heck, Lussier book talks about the premium is actually just removing LCG from the TSM and has nothing to do with value or small premiums. What most "value" investors are referring to is NOT a value premium (which is already argued despite FF3F model publication), but the ability to tease out metrics and as I call it "read the tea leaves better then the next guy". If you are the latter great. You do you. But the data does not support there is a specific set of valuations that can be used to predict future stock returns. Thus you are just reading the tea leaves better then the next guy. Just like that there are folks who read it worse. If there is PEER review study let me know as I am happy to be proven wrong, but I don't know any. That should be rather common sense. There are billion dollar funds that have folks with a double masters in math from MIT (like one of my buddies) who sit and write algos. 24/7 using every iteration of data available on computers that are worth more then your house for the last 30+ years. They have not found any predictive value either that is consistent. Of course, every time I write this folks say, "well I am the exception". My answer is great for you. Then why don't you put your thesis down, print out your transaction history, and submit it to a fund manager and start making some REAL money. No one has done it yet... wonder why?? Do the same folks who claim to beat the market just not want to make MILLION in portfolio manager fees?
You mean small cap value is up not growth. Mostly because people are panicking at the large growth tech correction for anything that is not large cap growth. Large cap value (energy/util/com/staples) is also doing well but nether is a sign of a turn around. This isn't even a large correction yet, to many people are 100% into LCG tech (like AARK) and couldn't see the hiccup coming. I was a kid in the '70's, lost my shirt in dot.com and 2008 I managed to get this one right.
I would use SPY or VNQ. For LCG, I would use either VUG or QQQ and for REITs, I'd pick O over VNQ. The results are much better when I make those changes. My personal selections are: QQQ - 50% TLT - 25% GLD - 15% O - 10%
The point is LCG outperformed the general market so it should not be a surprise that it will eventually underperform the market like every asset class that is up eventually has to go down (if not now at some point). No different with gold in 1970s, japanese stocks in 1980's, tech stocks in 1990's, small cap stocks and EM stocks 2000's, etc... Especially true since there is no risk/ reward explanation for outperformance beyond that of a story of beta risk. BTW... You might want to write to "good reads" they are wrong then about the quote. And, of course, I already know it is in reference to his 3rd law of motion. That is still fresh all these years from high school physics. https://www.goodreads.com/quotes/433926-what-goes-up-must-come-down
You keep telling yourself that. I said this in the height of the mania, but LCG (due to tech) has DOMINATED every other asset class last 10 years. No asset class has repeated as the winner in the next 10 year period since I looked back to the 1960's. The only consistency is that EVERY period there are investors who think "x" is the exception to the rule. It is no different then Newton said, "What goes up must come down". It holds in gravity and stocks.
If you are in an index fund yes. That is the point of taking advantage of "reweighted". If you are in individual stocks... no. There is no RTM (reversion to mean) on single company Also, the bigger issue for folks thinking that tech (LCG) will continue to outperform the larger market. In fact, this last 10 years is a bit of an aberration as growth usually UNDERperforms value in every equity market through history. Growht often goes through VERY volatile periods of extreme outperformance followed by underperformance. So after 10 years of outperformance is it RTM where it will underperform the general market? Time will tell.
Shouldn't those who are still investing results be to current date? Also, the benchmark needs to be adequate, i.e. tech guy needs to be compared to SP500 LCG. Value guy needs t be compared to SP500 LCV. A dividend guy/ gal needs to be compared to dividend index. Also are these post taxes along with past fees/ expense ratios/ 12b-1 fees/ loads?
I would agree with this. I don't think tech is doing bad because of the reality of interest rates, but the fear of rising rates AND tech has been dominate for last 10+ years so eventually a change of guard is due. No subasset class has dominated for more then one decade in a row since 1960's and 100% LCG investors are going to learn that the hard way. If you want the returns of 1990's decade you have to accept the returns of the 2000's. RTM (reversion to mean) exists for asset classes.
Is this your fund? [https://www.morningstar.com/funds/xnas/rbgcx/quote](https://www.morningstar.com/funds/xnas/rbgcx/quote) If so, the answer is it makes the FA money vs. you money. Not only does it have a REALLY high ER, has load fees, and 12b-1 fees. Other negatives: It is actively managed so unlikely it will get anywhere close to sp500 return and has high turnover (75%). Now it is balanced fund and looks to something like 70-85% stocks (similar to sp500 as LCG) and rest in short term low quality bonds. So it isn't fair to compare its return to sp500 (100% LCG stocks). I would sell that fund and just move it to either a sp500/ total stock market INDEX fund (make sure it says index fund) whichever hast the lowest ER. If none is available then they will have a low cost target retirement fund and choose that one. Nothing the FA is going to say is going to make sense nor will he agree. Waste of time meeting them so just focus on making the changes ASAP!
It isn't about basic needs vs. tech. It is simply about folks not understanding/ wanting to understand it is NORMAL for one asset class (large cap growth) to dominate for a while and then not. I've mentioned several times on these boards the same asset class has NEVER dominated more then one decade at a time since the 1960's. LCG had its day in the sun in 90's, like 2010's run, and there is a chance it will hibernate like it did for the ENTIRE decade of 2000's. As the old adage goes, "Those who do not learn from history are doomed to repeat it".
small cap growth is like a trap IMO. SCG basically follows in tow Large cap growth. Yet historically perform worse as a whole than LCG yet carry way more volatility and risk. Now, some SCG funds and stocks definitely do outperform the index as a whole. The last 5-10 years SCG funds have done very well compared to the benchmark (over 68% of SCG funds have beaten their index the past 5 years and about 50% over 10) but they still haven't beaten the LCG index over that time. I avoid SCG in almost every instance. I'd rather just allocate that money to LCG and be done with it. Stock picking in that space definitely could have some appeal.
There's the FNGS ETN but it has a high expense ratio. For long term holds a LCG like the other comment said would be the better option.
Any LCG ETF is essentially at least 20% FAANG these days
Sure, but there is no data to support a risk premium going for large cap growth in any academic theory. In fact, there is quite a bit of data of better results of constructing a portfolio of improving returns by eliminating LCG. Lussier's excellent book talks about this. There is a A LOT of recency bias going on trying to justify the hot sectors, but most likely just in in late 90's, that trend will go back to the "norm", i.e. RTM (reversion to mean). In investing one gets rewarded for taking on systematic risks so doesn't make sense to overweight a segment that there are not risks to be taken on.
Tech usually refers to U.S. large cap growth asset class. If you look at asset class returns since 1960's to current no single asset class has led 2 decades in a row. Not once. LCG was great the last decade so if it does it will do something no asset class has done in last 50+ years. The reason is Reversion to Mean. Asset classes (unlike single company stock) has shown RTM to get back to its long term CAGR. If it has been trending above it it will eventually trend back down and vice versa. The whole idea is risk premiums given to market, small, and value. Honestly, there is a better chance of international, EM, or small cap value doing well in the next decade then Large cap growth (tech).
SCG is something I've basically abandoned in my portfolio. tracks LCG and with less return and more risk. I use the avantis and DFA products to capture S/M CV
> since 1950's or so there has NEVER been an asset class (LC/LCG in this case) that has led other asset classes 2 decades in a row Rob Arnott did a study showing the 'top-dog' stock any given year tends to underperform their sectors and the broader market by 3-4% going forward. this is a global phenomenon. the smart move is to minimize exposure to the hot/trendy stocks but oh well...
Easy it is called recency bias. The same as why everyone loves U.S. only stocks. Same reason everyone loves growth stocks. When something is on a tear everyone floods into it thinking the party will last forever. Hint it doesn't. The more they get bid up beyond reason the harder they crash. I mentioned this on another thread since 1950's or so there has NEVER been an asset class (LC/LCG in this case) that has led other asset classes 2 decades in a row. So either this will be the first time (2020-2029) or this will be like every other decade where many investors will underperform.
Way too aggressive. As I mentioned to other posters no asset class has led for more then one decade in a row. LC and LCG have for 2010-2019 so the chances of the next 10 years being like the last is, well... never happened in last 60 some years. Every decade a new asset class leader takes over and this decade is likely to be no different.
The point is not technology continuing to grow but an asset class never goes up forever. At least it hasn't yet in last 60+ years. Just look at any chart. There are times large cap outperforms and then underperforms small. Same for growth and value. Same for U.S. vs. international. So either you believe this is a new normal (has been said and wrong countless times before) or there will be a rotation. RTM (reversion to mean) has been shown to exist at the asset class level. Just like rubber band. You can only stretch it so far before it eventually snaps back. Then can be pulled again. Rinse and repeat. There is a reason the great Sir John Templeton is famous for sayin, "The 4 most dangerous words in the english language is This Time is Different." BTW LAM is not the holy grail in semiconductors... ASML is so if you want to pile into one I would have chosen that one. The reason I said leave it out is same as microsoft is why hold an individual stock if you are holding the asset class itself (LCG).
Some comments... 1. Way too much 3x leverage funds. >50% in leveraged is way too aggressive and asking for trouble. Also considering they are so heavily tilted to LCG (tech and semi's). When (not if) tech takes a dump your portfolio will blow up in a bad way and you will lose a lot. Tech dominated 2010's but keep in mind looking back to the 1950's to current no single sector has dominated 2 decades in a row. NONE. So chances of the next 10 years being as good to tech as the last is low. That is what all the twitter folks fail to realize. They all think this time is different. Well everyone says that every decade when that sector is hot. It doesn't repeat. 2. Get rid of ICLN and UCC. Doesn't do much to add diversification. 3. Get rid of Microsoft and LAM since you are so heavy already with 3x in both tech and semiconductors. My suggestion. Do something like Total stock market 70% and tech 3x 30% if you have that tech and leveraged bent.
Actually, the question you should have asked is why buy the individual stocks over the index. In financial theory, there is no premium to be had by taking on single company risk. So you take the risk of picking out a stock that may underperform the index (SPYG) with no expected return greater then that index. If you get a better return it is just luck or unless you believe you have some ability to valuate a company better then billion dollar funds and hedge funds with million dollar computers crunching all sorts of data by all the best IVY league grads that money can buy all while using "inside" info. as best they can to get a competitive advantage. In reality, you will (like all folks trying to do the same) underperform the said index over any 10 year time horizon all while doing more work then just buying the index. My advice, as you can tell is just buy the index ESPECIALLY in the world of LCG. That is probably the sector that has the MOST retail and individual eyes watching ALL THE TIME. Now, if you were talking about some microcap or OTC company then sure the retail investor has a chance since there is no big money/ professional money in that space due to laws and liquidity reasons.
I would combine the VOO and IWF and just do VTI (total stock market). It is great LCG has done so well last 20 years, but RTM is more then likely then continued outperformance for another 20 years. If your going to tilt to small I would add value as well (SCV) to take advantage of size AND value premiums (if you believe in it) vs. just small premium via IWM. I would get rid of all the sector stuff, but if you really want to still get some LCG then allocate a portion to vanguard tech or nasdaq. Is the real estate a REIT? If so, make sure it is tax efficient placement since the dividends are NOT qualified. If it is not a REIT just skip the fund all together. Also, if it is a REIT they have a HIGH correlation to SCV if you add that from above advice. If it was me and trying to guess where you are going with your interests I would go... 30% VTI 30% QQQ or VGT 20% IJS 20% VXUS Simple, low cost, and will get you what you were looking for from your original plan.
They all include faangm as a large part of their holdings and track large cap us growth stocks in their own way. Everyone likes the nasdaq but there are other less expensive options. There’s even SPYG. I used to have SCHG but I’ve decided to just invest in VTI as LCG makes up a significant portion of it anyway.
Im not talking about an IRA but the principle is the same. Never reinvest dividends if you are an investor. If you buy one stock, yeah whatever, do your thing. Investors use cash flows to be selective about asset allocation and opportunity. A stock I am holding that pats a dividend may not always be the best opportunity for investment at any given moment based on my due dilligence. If stock A should return 5% over the next 12 months and stock B should return 12% over the next 12 months, why would I reinvest dividends from Stock A into Stock A? If I run an asset allocation model that should have 30% LCG and 25% LCV and I am at 20% LCG and 35% LCV during the recent run up of valuen stocks, why would I reinvest LCV dividends and continue to run the allocation up way past my threshold? Bottom line, reinvesting dividends has no place in MPT. If you are running a WSB meme portfolio you do you
LCG has historically trailed the market. We just finished the best decade for LCG *ever*.
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I have a play portfolio that makes up about 5% of my net worth right now. Everything else in other accounts is essentially VTWAX. Truth be told, to scratch my "itch", I have a bunch of individual holdings: TWTR, Square, BOMN, DIS, to name a few. I also have some small cap value exposure via ETFs. I'm currently sitting on about 20% cash inside this play account. I've been thinking of purchasing sleep well at night REITs like $WPC and $O to essentially act as a stable bond allocation that would hopefully beat inflation moving forward. This way, if some of these large cap growth stocks end up being over-valued (which I think they are), I don't have to worry about market timing ... can just rebalance moving forward out of the REITs and into the LCG stocks I want to hold long term. Curious to know opinions on this strategy. More generally, has anyone replaced their bond allocation with high quality REITs in a rising rate environment?
I am 100% VTWAX except for a small play account that makes up about 3% of my net worth. Curious, would VNQ be a good hedge against a potential fall in large cap growth specifically? I am determined to stay the course, but given that my job and therefore my only income source is in tech AND I don’t own any real estate, I do worry that the total market is over valued due to LCG tech stocks. I wonder if a REIT allocation (maybe 10% of equities) might dampen any upcoming blow?