290 | We're Talking Millions | Paul Merriman

<ul> <li>Does your portfolio own enough of the companies that carry a lot of the growth over extended periods of time? When you buy index funds, you aren't as diversified as you think you are.</li> <li>Cap weighted index funds mean you are buying a lot of the companies that are doing really well. But there are two asset classes Paul Merriman is a fan of that he thinks don't get enough attention, small cap and value.</li> <li>Although many people claim to believe in a buy and hold strategy with investing, their behavior says otherwise. They like to buy when things are hot because they believe it's going to keep going up.</li> <li>If you look back as far as 1928, a lot of the time the S&P 500 is walloping small cap value returns, yet at the end of this 92 year period, small cap value made 24 times the amount of money the S&P 500 did.</li> <li>Even though there are long periods of underperformance, when small cap value does take off, there is outstanding performance. Then when it reverts back to the mean, there is a higher compound rate of return.</li> <li>Owning a large cap fund means each holding in that portfolio, and how much of the portfolio it represents is based on how large that company is. The big companies represent 80-85% of the corporate public value in our economy.</li> <li>However, history shows that the smaller companies and the value companies produce a better rate of return because they are more risky.</li> <li>It doesn't have to be a lot to make a big difference. If you were put 10% in a small cap value fund, it would give you a legitimate shot at having 20-30% more money when you retire.</li> <li>The top 20 companies probably make up 20-30% of the money you have invested. Investing in an S&P 500 or total stock market fund provides an illusion of diversity. As companies get to be bigger in size, it becomes increasingly more difficult to double or triple in size.</li> <li>Companies are valued by the number of shares times the price in the market.</li> <li>Large cap index fund companies average a mar