Investing in individual large-caps is great, however, if you also own any part of the S&P 500 through an ETF or mutual fund, you may be too heavily weighted in U.S. large caps. Tim Hanson and Brian Richards for The Motley Fool want to know if that’s the kind of asset allocation you intended. Probably not. You could do worse than the S&P 500, of course: it has a roughly 10% historical annual return.
Even within the most conservative game plan, though, there should always be room for small-caps. After all, they’re the best-performing stocks on the market. Whether it’s 10% or 30%, depending on your risk tolerance, the returns will help you beat the market over the long-term and maximize your savings, especially if you manage to pick the right small-caps.
If you own a broad-based ETF such as the Vanguard Total Stock Market (VTI) and also own stock for, say, Exxon Mobile (XOM), General Electric (GE) or Citigroup (C),you may have unknowingly doubled up on these market mammoths. Make sure to review your portfolio and know what you’re holding so that get exposure to different asset classes.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.