I guess devil's advocate would be that FSMAX took a relative beating the last few years, so any 'last X years' stat is going to look pretty poor.So I’m debating exiting FSMAX. I know SD, blazin and other posters didn’t really suggest capturing total US market in the first place but I decided to after doing some reading some boglehead discussions.
It’s wayyy more volatile than FXAIX and I assume any other sp500 index. Historically lower returns than FXAIX. In hindsight all the boglehead posts/topics about it didn’t really give any sort of technical reason to capture the full market other than some dogma about owning the entire market weighted. On one hand I really hate to exit it because I don’t think that’s very boglehead of me - not sticking to my plan and I already gave up my international last week, IXUS.
On the other hand I think boglehead philosophy is just philosophy. It’s not hard rules and if something doesn’t make sense why stick to it?
Right now out of FXAIX + FSMAX total my FSMAX accounts for 15% of that total. I think market weighted it would need to be 18-20% to approximate total market. Approximating total stock market - Bogleheads
FSMAX vs. FXAIX — ETF comparison tool
Compare FSMAX and FXAIX based on historical performance, risk, expense ratio, dividends, Sharpe ratio, and other vital indicators to decide which may better fit your portfolio.portfolioslab.com
Looking for some thoughts on this. Even if you think approximating entire market isn’t worthwhile I’d like to hear the devils advocate opinion for doing so because as I’ve said it seems nothing more than some dogma and likeBlazin has said in the past winners will bias up into sp500.
edit - I do want to say I see boglehead posts like this. However this goes back to what
Here's a chart with both equivalent indexes on a 10-year slider. Move the slider at the bottom around and you can see there were plenty of similar periods where small + midcap were at near parity with or beating the big boys:
PerfCharts | Free Charts | StockCharts.com
Dynamically compare the performance of up to ten different ticker symbols on the same chart to see the relative strength of a group of stocks, ETFs or funds.
stockcharts.com
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If you want my real opinion, historical research has consistently shown small cap (which I think is the relevant currently-underperforming part of FSMAX--mid cap and small cap each make up about half of the rest of the market(?)) to be a 1-3 year, post recession type of play.
US Stocks 12 month post recession performance (this is bottom 30% minus top 30%)
Small Caps Have Been a Big Story After Recessions
Some investors are already evaluating opportunities offered by a post-slowdown world. One of these opportunities is small-cap stocks, which have historically outperformed large caps, especially after recessions.
Obviously try to wait at least a year before you'd sell. Great way to lose out is to have your returns slashed by 10-15% due to missing the capital gains tax window.
Long-term, my opinion based on not much data is that small cap will face a more difficult road to investment returns than it has in the past because:
1. Leaders in the S&P 500 have realized it is way easier to just acquire potential future small cap winners early rather than letting them go public. Eat one large company? Tons of regulatory fighting. Eat 10 smaller companies in 1 year, any of which could have scaled to become a future competitor? No one bats an eye! Tech, and frankly just the digitization of consumer channels, also better lends itself to scaling acquisitions across the acquiring company's base vs. the old mantra of solely "buying customers", though you certainly still do pay for that!
2. VC funding has a bigger and bigger appetite to wait longer and eat up more market value prior to cashing out via IPO when a company is growing.
Here's a paper from University of Florida with data (charts are mine) showing median inflation-adjusted market price of companies at IPO and # of IPOs which more or less makes both points:
Fewer companies going public, and those that do entering at a higher valuation, which means that the 1980s 1000% growth journey from $100M to $1B gets absorbed by private capital instead of public funds. Over half of the 311 IPOs in 2021 cannot even double in value before being reclassified as mid cap--and that's in 2017 dollars. In that year, there were 120 tech IPOs with a MEDIAN market value of $3B in nominal 2021 dollars.
Those IPOs will still show up in FSMAX in the mid-cap, but it's an important part of the value story that used to exist and now does not, in my view. What never goes away, save for when they finally die, are all the companies that never quite break through. The median company leaves FXAIX after losing ~80% of its value. The median company leaves FSMAX after losing 100% of its value. Not sure if that's a relevant statement to calculating returns, but it is an illustrative one.
I mentioned it above, so here's the median age of VC tech IPOs. Willing to wait longer:
Lots of great data in that paper. I could be totally wrong about my interpretation of it, but that's where I'm coming from.
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. Walmart is a solid long term investment though. It’s shopping catered to poors and if there’s one thing we’ll be having exponential growth of over the coming years, it’s of poors..
