![]() My firm specializes in navigating changing markets, and we’ve already made some initial changes to our mutual fund and ETF portfolios to add exposure to these new leading areas. Over the last three and six months, value stocks have outpaced growth stocks, and foreign stocks have also done well. The small-cap Russell 2000 Index gained in January, while large-cap indexes like the S&P 500 and the Dow fell. As the trend moves away from large-cap growth stocks and tech companies, new opportunities have emerged in small-caps, value, and foreign stocks. Markets have been changing in recent months. In challenging markets, some areas typically hold up better than others, and that may prove to be an important investment opportunity in 2021 as it was in 2000. Investors who shifted their portfolios from large-cap growth to value funds, as my firm did, were able to avoid the worst of the losses and end the year with gains. This divergence gave active investors a way to take shelter in the storm. The tech-focused Nasdaq Composite Index fell -39.0% in 2000 while the Wilshire 5000 Large Cap Value Index gained 17.0%. Large-cap growth and technology stocks plunged, while value stocks had gains. But there’s another important detail about the dot-come bust that often gets overlooked: when the tech bubble burst in 2000, it didn’t affect every area of the market in the same way.
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