Join us tonight for a special event with Louis Navellier … and get the name of the stock which he believes will be bigger than his Nvidia pick, now up 900% since his call
Time for another pop quiz …
You have $100,000. You’re given only two options for investing it …
A large-cap stock portfolio or a small-cap stock portfolio.
This will be your retirement nest egg. You’re going to hold for three decades. But as a little twist, you have to monitor the value of your portfolio each week (this will make sense in a moment). And yes, you can sell if you ever believe that’s the right call … after all, if this is your retirement nest egg, you have to protect it.
Which portfolio do you choose? The one with large-cap stocks or small-cap stocks?
To make sure we’re all on the same page, “cap” refers to “market capitalization.” It’s a measure of a stock’s size, representing the total market value of a company’s outstanding shares of stock. You calculate market cap by multiplying the total number of a company’s outstanding shares by the market price of one of those shares.
So, big or small, what’s your pick?
Well, historically, small-cap stocks post greater returns.
A market study spanning eight decades found the most consistent winner was small-cap value stocks. Except for the 1930s, they produced decade-long gains that were always over 12.5% per year on average. The S&P 500 (our proxy for large caps) returned about 10%.
Over time, that 2.5% differential can mean a lot more money in your portfolio. How much?
Let’s say you fund a small-cap portfolio and a large-cap portfolio with $100,000 in each, then let them compound at the respective rates of 10% and 12.5%.
After three decades, that seemingly small 2.5% differential has turned into a portfolio differential of nearly $1.7 million. As you can see below, it means the small-cap portfolio has nearly doubled the large-cap portfolio.
So, small-cap wins, right?
Yes, but there’s a catch … and it’s why our hypothetical included the requirement that you monitor your retirement portfolio value each week.
***With greater returns comes greater volatility
Small-cap stocks are more volatile.
The results of a study spanning 1979 through 2018 found that the standard deviation of monthly returns of small-cap stocks was 18% greater than large cap stocks.
Now, 18% may not sound all that high, but put real dollar amounts on it.
Again, let’s assume two hypothetical portfolios, a small-cap and a large-cap, each valued at $1,000,000.
In our hypothetical, a bear market has reared its head, and the broad market (the large cap S&P) is down, say, 26%.
This means the large-cap portfolio has lost $260,000.
Meanwhile, the small-cap portfolio, due to its additional 18% volatility, is actually down nearly 31%, or almost another $50,000. Could you handle that?
Perhaps … perhaps not.
Every investor has a personal breaking point (“I have to sell!”) based on their own temperament and financial pressures. Plus, each investor responds differently to having a portfolio that’s doing worse than the market (or God forbid, your neighbor).
I can tell you from my years in this business that what we think we will do in a hypothetical like this often is not what we actually do when we see our portfolios being gutted in real time.
If you disagree, ask any of the millions of mom ‘n pop investors who sold stocks in 2009 because the losses were simply too painful.
Or take just the last few days in the market. As I write Wednesday afternoon, this morning’s rally has fizzled and we’re down again. The S&P has lost nearly 8% since last week — which, in the grand scheme of things isn’t a big deal.
Yet, some investors are pulling their hair out. Now imagine those investors being down 31%!
The reality is that great, long-term average returns mean nothing if a bout of extreme volatility causes you to sell your stocks in fear.
Yes, small-cap stocks generate higher returns than large-cap stocks. And that means they can be wonderful wealth-generators. But they also come with greater volatility, which can make owning them harder on the emotions, putting you at greater risk of selling them at the wrong time.
Is there a way to have the bigger returns without the self-defeating emotions?
You’re in luck …
***You’re invited to Louis Navellier’s Breakthrough Stocks Summit, happening tonight at 7 PM EST
In Breakthrough Stocks, Louis focuses on the same, outperforming small-cap stocks referenced above. Yet, he takes it one step further …
He applies a codified set of numbers-based rules that identify which specific, elite small-caps to buy, when to buy them, how long to hold, and when to sell in order to lock in profits.
In other words, Louis has a quantitative system, engineered over four decades of investment experience, that removes emotion from the investment process.
The benefit? You get exposure to the bigger gains from small caps, while sidestepping the biggest threat to your long-term returns … your own emotions.
From Louis:
If there’s one thing I always emphasize to my readers, it’s the importance of a good stock-picking system like the one I’ll feature in Wednesday’s Breakthrough Stocks Summit. Why? Because if we rely on our own instincts, they can lead us to make some really silly decisions. Human biases can torpedo your investment performance — so, they’re best avoided or minimized.
That’s the goal of a whole area of research called behavioral finance. Through an enormous amount of experimentation, psychologists and economics have attempted to answer the age-old questions:
Why do we hold onto losing stocks when our rationale for buying the stocks is gone?
Why do we sell winning stocks way too quickly?
Why do we resist making smart financial moves when we can easily see how beneficial they will be?
Why do we act so crazy with money?
***Louis’ track record illustrates the power of a quantitative system applied to small-cap stocks
The system scans nearly 5,000 stocks every week, calculating each stock’s “quantum score” as Louis calls it.
When any given stock qualifies for an “A” according to Louis’ system, that’s when Louis says to watch out for big moves in its share price.
As one example, there was IntriCon Corp (IIN), a company that manufactures wearable medical devices.
Louis’ system found IIN in September of 2017. At the time, the stock was trading a little under $9 a share. And then this happened …
Back to Louis:
IntriCon’s share price soared all the way up to $65 over the next 11 months. Meaning anyone who followed my recommendation would be sitting on a 615% open gain in less than a year!
A $10,000 investment would yield $61,500 in profits from just one trade.
This is the same system that enabled Louis to find Hansen Natural (now Monster Beverage (MNST)), that climbed from $3.96 to $40 before Louis’ subscribers took profits.
The system also found Google in 2005, and Nvidia in 2016, and tipped Louis off on selling Cisco and Sun Microsystems in 2000, while other investors held on and lost big.
Join us tonight to learn more about Louis’ system and how the right small-cap stocks can make a difference in your portfolio
Louis will be discussing the details of his system and the quantum score. Even better, he’s going to reveal his #1 Breakthrough Stock to the public. The last time he made a stock call like the one he’ll be making tonight was back in 2016, when his pick was Nvidia. That stock is now up more than 900% since Louis’ initial call.
Back to Louis:
I believe this next recommendation could be even bigger. And I’m happy to share it with you as a thank you for an hour of your time tonight at 7 p.m. ET.
By the way, during the market bloodbath of the last two days, four stocks in Louis’ Breakthrough Stocks portfolio hit 52-week highs. That’s the power of picking based on fundamentals, earnings and buying pressure.
To join us, just click here.
Have a good evening,
Jeff Remsburg
