We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
It was written by Paul Merriman, a founder of Merriman Investment Advisors, who has written and podcasted about retirement, personal finance and value stocks for years.
That article has a great title, right?
Other than winning the lottery, who doesn’t want an apparently easy way to become rich?
The article explains that if you started in 1970 with $1,000, and increased it about 3% annually due to inflation, after 48 years invested in a basic S&P 500 index fund, you would have had $1.9 million.
Merriman also lists the returns on various other types of portfolios over the same period with the all value ETF portfolio giving the best results.
After investing $104,408 and being patient for 48 years, that investor in small cap value stocks would have had $4.4 million.
The Magic of Compounding
You don’t have 48 years to wait to get to a million dollars?
No one said getting to a million dollars in a portfolio was easy. But you’re certainly not going to get there without starting.
And what the article really points out is that small investments can become big amounts decades down the road simply due to the magic of compounding.
Time is your best weapon.
The Power of Small Cap Value
Historically, small cap value stocks have outperformed all other equity classes.
Obviously, past performance does not guarantee future results. But for many value investors, value still holds out the most promise.
Where should you start if you’re interested in the small cap stocks?
Tracey ran a screen looking for companies with a market cap under $1.5 billion, with classic valuations including a P/E under 15, a P/B under 3 and a P/S ratio under 1.0.
She then combined it with a Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold).
There were 123 stocks in this screen. That should provide plenty of options.
However, for those who want to play the small caps by owning a larger collection of them, there’s also the basic small cap value ETFs.
5 Small Cap Value Stocks and ETFs
AdvanSix (ASIX - Free Report) is a manufacturer of nylon 6 resin. Full year 2017 sales rose 24%, with a 9% volume increase. It has a market cap of just $1 billion and a forward P/E of 10.6.
El Pollo Loco (LOCO - Free Report) is a fire grilled chicken chain with 475 restaurants, mostly in the western states, including California, Arizona, Nevada, Texas and Utah. While same-restaurant-sales rose 1.4% in the fourth quarter, the company guided to flat comps in 2018. Shares are cheap, with a P/B ratio of just 1.3.
Caleres, Inc. (CAL - Free Report) is being ignored by Wall Street. This global footwear retailer, who owns the Famous Footwear, Naturalizer, Dr. Scholl’s and Bzees brands, among others saw sales up 8% in 2017. It trades with a P/S ratio of 0.5.
SPDR S&P 600 (SLYV - Free Report) is a small cap value ETF with an expense ratio of just 0.15%. It has 454 holdings and is yielding 1.6%.
Vanguard Small Cap Value (VBR - Free Report) holds 889 stocks in its portfolio and has an expense ratio of only 0.07%. 30% of the portfolio is in financials with another 20% in industrials. It’s yielding 1.8%.
Investing in small cap stocks takes perseverance, especially in markets like the current one where they are under performing large cap growth stocks.
What else should you know about the power of compounding and value stocks?
Listen to this week’s podcast to find out.
[In full disclosure, Tracey owns shares of VBR in her personal portfolio.]
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks’ has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.
Image: Bigstock
How Small Investments Can Add Up to Big Bucks
Welcome to Episode #87 of the Value Investor Podcast
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio service, shares some of her top value investing tips and stock picks.
Recently, Tracey saw an article on MarketWatch called “Save $1,000 a year. Retire with millions”.
It was written by Paul Merriman, a founder of Merriman Investment Advisors, who has written and podcasted about retirement, personal finance and value stocks for years.
That article has a great title, right?
Other than winning the lottery, who doesn’t want an apparently easy way to become rich?
The article explains that if you started in 1970 with $1,000, and increased it about 3% annually due to inflation, after 48 years invested in a basic S&P 500 index fund, you would have had $1.9 million.
Merriman also lists the returns on various other types of portfolios over the same period with the all value ETF portfolio giving the best results.
After investing $104,408 and being patient for 48 years, that investor in small cap value stocks would have had $4.4 million.
The Magic of Compounding
You don’t have 48 years to wait to get to a million dollars?
No one said getting to a million dollars in a portfolio was easy. But you’re certainly not going to get there without starting.
And what the article really points out is that small investments can become big amounts decades down the road simply due to the magic of compounding.
Time is your best weapon.
The Power of Small Cap Value
Historically, small cap value stocks have outperformed all other equity classes.
Obviously, past performance does not guarantee future results. But for many value investors, value still holds out the most promise.
Where should you start if you’re interested in the small cap stocks?
Tracey ran a screen looking for companies with a market cap under $1.5 billion, with classic valuations including a P/E under 15, a P/B under 3 and a P/S ratio under 1.0.
She then combined it with a Zacks Rank of #1 (Strong Buy), #2 (Buy) or #3 (Hold).
There were 123 stocks in this screen. That should provide plenty of options.
However, for those who want to play the small caps by owning a larger collection of them, there’s also the basic small cap value ETFs.
5 Small Cap Value Stocks and ETFs
Investing in small cap stocks takes perseverance, especially in markets like the current one where they are under performing large cap growth stocks.
What else should you know about the power of compounding and value stocks?
Listen to this week’s podcast to find out.
[In full disclosure, Tracey owns shares of VBR in her personal portfolio.]
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks’ has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.
Click here to access these stocks. >>