S&P 500 vs. Small Cap Value
The S&P 500 has been crushing in recent years. But what about over several decades? Let’s take a look.
The S&P 500 has been crushing in recent years. But what about over several decades? Let’s take a look.
The S&P 500 is an index that tracks the 500 largest US companies, and therefore has a ton of exposure to high flying tech companies such as Apple, Amazon, Google, Microsoft, and Nvidia.
Most of these companies are considered “growth” instead of “value” companies, meaning that their stock price appears overvalued by traditional measures, but investors believe that the high prices are justified by continued growth.
Let’s compare the S&P 500 to a very different asset class, Small Cap Value. These overlooked companies are worth less than $2 billion and have stock prices that are low relative to their balance sheet and/or their earnings.
Through 2024 | ||
S&P 500 Index | Small Cap Value Index | |
5 years avg annual return % | 14.5% | 12.2% |
Growth of $10,000 | $19,680 | $17,781 |
10 years avg annual return % | 13.1% | 9.7% |
Growth of $10,000 | $34,247 | $25,239 |
20 years avg annual return % | 10.4% | 9.2% |
Growth of $10,000 | $72,340 | $58,137 |
30 years avg annual return % | 10.9% | 13.1% |
Growth of $10,000 | $222,816 | $401,678 |
50 years avg annual return % | 12.4% | 17.1% |
Growth of $10,000 | $3,453,946 | $26,782,108 |
The S&P has outperformed Small Cap Value over the last 5, 10 and 20 years.
However, when we look at 30 and 50 year periods, which include some major recessions, Small Cap Value performed significantly better.
Although nobody can predict what will happen next, it’s clear that most investors should have some exposure to small-cap value stocks, or even overweight it a bit.
If you want to chat about your investments, schedule a call through the link on my website, or just do the algorithm stuff to see more videos like this. -Ken @ HWM
