Smaller companies within a wider portfolio

Linton

TheTracker wrote: »

.......
In terms of time, my understanding is you need to stick with it 20-30 years to have a good chance of the size premium showing above randomness/volatility, and that’s if it exists at all. Because of this, many people quite validly say Pah! and don’t bother with the faff of deliberately targeting/overweighting small stocks.

You twitch over a 0.1% difference in charges yet say Pah! to a 5%/year higher return as being too much faff. Each to his own I suppose.

sixpence.

A_T wrote: »

I would not bother with US small cap but I do look at UK, Japanese and European mid and small cap.

This is my exact approach as well. Are small cap and mid cap different sectors and what is the advantage of having both in your portfolio?

Morphoton

If anyone thinks the PE on the S&P is scary, it is a lot higher on the Russell (reflecting the higher growth prospects).

Whilst it is true that the P/E of the Russell 2000 is a scary 100, the actual P/E of portfolios can be a lower.
For example, using the free X-Ray Tool on the Morningstar Website, the P/E of the JP Morgan US Smaller Companies IT (JUSC), which I hold, is given as 22.72*.
*I cannot however verify the accuracy or how uptodate the figure is. I do know for example that some P/E figures shown do not change on a daily basis despite price changes.

TheTracker

Linton wrote: »

You twitch over a 0.1% difference in charges yet say Pah! to a 5%/year higher return as being too much faff. Each to his own I suppose.

I don’t say Pah. Just that I understand why others do. As per post #5 I hold a sizeable chunk of small cap - 15% held in a small cap fund - and intend to hold it for years.

TheTracker wrote: »

IIRC my equities are split 45% developed, 12.5% property, 12.5% EM, 15% value, 15% small with no home bias. So I suppose thats 20-25% small

aroominyork

Once again, how do I paste a graph into this thread please?

MallyGirl

if you host a picture somewhere (I used to use photobucket but I am sure there are other options these days) then you can insert the URL of the image

aroominyork

Below are five year performance graphs of two UK smaller company funds, Liontrust above and Old Mutual below. The overall performance is similar but the Liontrust fund has a much smoother day to day ride. What can be read into this?

Also, the Liontrust has an FE of 63 and the Old Mutual of 95. Given the similarity of their performance, and given that FE measures volatility, is it the jagged nature of Old Mutual’s graph that gives it have a higher FE rating?

Tcquins

Yes, FE risk scores are based on volatility in the funds, with a greater weighting to more recent volatility.

Old mutual’s fund has a few larger holdings than Liontrust (Fevertree for example) that have bounced all over the place.

planteria

economic wrote: »

...if i wanted to go for smaller companies i would only consider a managed fund...

that's what i do. c12% of my portfolio overall is in smaller companies, with a Marlborough fund. though the holdings within the fund are 'higher risk', there are more holdings that many large cap funds would hold, spreading that risk. fwiw i would happily have a larger proportion in the fund, it's just that there are other things that i want to hold at the moment alongside.

aroominyork

Tcquins wrote: »

Yes, FE risk scores are based on volatility in the funds, with a greater weighting to more recent volatility.

Old mutual’s fund has a few larger holdings than Liontrust (Fevertree for example) that have bounced all over the place.

Thanks Tcquins. I'm still confused by why Liontrust would have a very similar line of best fit as Old Mutual but is much smoother day to day compared to OM's jagged graph? What causes that, and it is responsible for the lower Liontrust FE rating? Is it just OM having a number of large, more volatile holdings?

I bought Liontrust as I thought it was a lower risk fund - not fully grasping the difference between risk and volatility. Now I wonder if that was a bad move: it's very expensive with a 3% spread and 1.37% OCF.