Michael Fabian | Nov 25, 2015 05:02AM ET
Examining the markets over the last several months, it comes as no surprise that the recovery in equities has been a bit lopsided from a capitalization perspective. Large cap dominated portfolios have nearly erased their losses, stemming from the August-September correction, while more growth orientated small and mid-cap strategies have lagged. From a performance perspective, small cap stock indexes are still roughly 8-10% off their 2015 highs, allowing a lot of room to play catch-up.
This is most likely the result of the steep losses that transpired in the energy and biotech sectors, which dominate many small and mid-cap indexes. Yet while these indexes led on the downside and exhibited lackluster performance during the majority of the rally, there is some recent evidence that suggests there could be a changing of the guard.
Examining small and mid-cap exposure within your current portfolio strategy requires a close look at your tolerance for volatility. Yet, if I were a long-term investor with cash to put to work, I would make sure that it found its way into a few of the ETFs mentioned above.
Investors not interested in breaking their portfolio into a capitalization weighted shell game could choose a blended completion index such as the Vanguard Extended Market ETF (N:VXF). VXF has filled the key role of diversifying the capitalization structure of our Flexible Growth and Income Report portfolio since inception, and we even recently added to the position in an attempt to capitalize on these crosscurrents.
While these ETFs may not be as exciting as a new flat screen TV or some other Black Friday door buster, it’s my personal belief they will provide a better rate of return with time!
Disclosure: FMD Capital Management, its executives, and/or its clients may hold positions in the ETFs, mutual funds or any investment asset mentioned in this article. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.
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