After spending close to a decade in market and getting hands on most of the products in stock market. I stick to money framing technique for investment. (details here – MoneyFarming technique – by SKY01 – BetaIdeaz)
But today, I wanted to validate one simple thesis with more experienced folks in stock market.
Based on my experience, its feels like most of the large cap stocks are mostly slow growers, something like 12-15% of CAGR but multibagger returns are seldom found in them or even if found, its hard to latch onto them. And small and microcap stocks are the place where a 10x or 20x stocks are plenty, in one up cycle (like in 2014, 2017 or in 2021 cycle). The converse is also true in downcycle, but that’s the thrill of being in stock market.
Also I believe that mutual funds / stock ETFs are best way to get consistent return from market breadth.
So based on that, does it make sense to invest in broader market via Mutual funds/ETFs and invest exclusively in small/microcap stocks via direct exposure.
Though I never got a chance to confirm this from ValuePickr veterans, but whatever I knew of their public holdings, I see most of their value picks are mostly in small and micro cap areas.
I always thinks that is it all they hold? since its very difficult to get consistent return from small cap universe, and mutual funds / ETFs feels far better to reduce risk in market.
Please suggest your views on this, if you have done any longer experiment on these kind of thesis please provide the guidance.
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