Hidden Among Everything….
…are the boys and girls that will become historical figures in their lifetimes. We can’t identify them until after the fact.
…are the boys and girls that will become our mayors, city councilpersons, state senators, assemblypersons, senators, congresspersons, presidents and Supreme Court Justices. We can’t identify them until after the fact.
…are the companies whose innovative products and top notch services will enrich us this year, next year and the year after. We can’t identify them until after the fact.
…are the asset classes that will surprise us with their investment performance this year, this month and this day. We can’t identify them until after the fact. (Guesses can be made or bets placed. That's speculation not investing.)
What is known about investing; what are the facts?
After crunching years of data to determine what are the variables that actually impact stock returns globally (with statistical significance) one arrives at the following "premiums" available in the market.
Small company stocks outperform large company stocks; value stocks outperform growth stocks and more profitable companies outperform less profitable companies.
These premiums are persistent (not constant) and occurs with statistical confidence globally: in the USA, other developed countries and emerging markets. See chart below. Click on the image to enlarge it.
The fact is that to capture the return of an asset class, you need to own nearly every stock in that asset class because you cannot identify the winners and losers in advance.
Our investment philosophy reflects these facts, so...
…in our investing we own large and small stocks, value and growth stocks and more profitable and less profitable stocks – a lot of them – and then we place a slightly higher percentage of assets in small stocks over large, value over growth and more profitable over less profitable, so we can take advantage of these known persistent market behaviors that occur globally. We cover the entire world: USA, other developed countries and emerging markets.
As we look at the time period of 1/1/1999 through 3/31/2016, one of the best performing asset classes is US small stocks as represented by the Russell 2000 index. Our globally diversified 100% stock portfolio is competitive with the Russell 2000 (7.1% vs. 7.2%) with much lower volatility (16.7% vs. 19.6%). This same 100% stock portfolio significantly outperforms the S&P500 and All-World stock indexes.
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