Research released last month is turning conventional investing wisdom on its head. At a top investment conference, researchers demonstrated that a number of widely held beliefs about stocks simply have not held up over time. Here’s what they found:
- Low volatility stocks outperform volatile ones in the long run: Looking at forty years of data, researchers found that low volatility stocks did approximately 5% better than highly volatile picks. Many people, however, tend to think that the riskier a stock is, the more they will gain. The new findings now tell us the opposite is true.
- Big companies do better than little ones: Researchers found returns for large cap companies were better than for small caps during an analysis of the 1972-2012 time period. While big companies had returns over 12%, small companies were just under the 10% mark.
- Liquid stocks don’t actually perform as well as less-liquid options: Showing a difference of almost 4%, the research illustrated the benefit of investing in companies that are less liquid.
The takeaway? You don’t have to have a portfolio full of flashy “high-flyers” when it comes to growing your money. While many believe that fast-moving small caps are the better way to go, these new findings suggest that slow, unglamorous and steady often wins the race.
To read more about the study’s results click here.