I kicked off this three-part series last week with a commentary about anchoring your portfolio to large-cap stocks, and Mr. Market has provided ample evidence lately as to why that's a smart move. During a period of stomach-churning performance gyrations, the big boys have had done a better job of preserving their investors' capital relative to the little guys.
To wit: Vanguard 500 Index
Ninety days does not an investment case make, of course, but large caps as a group have been less volatile over the long haul, too, with the S&P 500 putting up better standard deviation figures over the past 10 years than either of the smaller-cap benchmarks mentioned above.
The lions roar
To my way of thinking, that makes the market's titans worthy of the lion's share of your nest egg, but that's not to say you shouldn't have exposure to the little guys, too. Far from it. Going that route, after all, could mean missing out on the kind of eye-popping gains that mid-caps such as Ultra Petroleum
Small caps have been on a lengthy tear too, of course, with the likes of Select Comfort
Thanks (yes, thanks) to the market's recent choppiness, all of those companies are currently trading at steep discounts relative to their respective 52-week highs. And that's good news -- at least if you're an investing cheapskate like me. Still, before adding any of 'em to your further research list, I'd encourage you to decide just how much of your portfolio you want to allocate to the market's various cap ranges.
A diversified and carefully calibrated portfolio, after all, can help take some of the sting out of market volatility.
The Foolish bottom line
"Careful calibration" is in the eye of shareholder, of course, and in the first installment of The Motley Fool's new GreenLight service, we've offered members guidance on how to take stock of their current portfolios (which may consist solely of 401(k)s or IRA accounts) before making their next investments. Fool honcho Tom Gardner weighs in with his ideas for beginning investors, too, and in the issue that's currently in the works, we demystify the crucial (but all-too-often neglected) concept of intelligent asset allocation.
If that sounds like the kind of financial information you could put to good use, click here to take GreenLight for a spin. In addition to the newsletter, the service comes with a website chock-full of practical financial advice, not to mention our members-only discussion boards. Hope to see you (or rather, read you) there!
At the time of publication, Shannon Zimmerman didn't own any of the companies mentioned. Select Comfort and Nuance Communications are Hidden Gems recommendations. You can check out the Fool's strict disclosure policy by clicking right here.