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US Small & Medium Companies
David Robson
Posted: 25 January 2024 15:07:33(UTC)
#1

Joined: 16/04/2021(UTC)
Posts: 18

New investor, and thinking of investing in a US Small Cap Fund.
Been recommended FTF Royce US Smaller Companies to look at.
Is it a good time before interest rate cuts later in the year?
Thanks
Dexi
Posted: 25 January 2024 15:15:14(UTC)
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ISP6 is a US small cap ETF , might be an idea to check out how the fund compares to a passive alternative .
1 user thanked Dexi for this post.
David Robson on 25/01/2024(UTC)
DIY Investing
Posted: 25 January 2024 16:00:31(UTC)
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Firstly, I’d never buy anything based on assumed certainties about what the fed, or any central bank, might do later this year. Anything that short term is likely already in the price anyway (just look at treasury yields).

A product as specific as a US small cap fund isn’t typically the first thing I would recommend to a new investor.

If you are going to buy something like that, it’s better to do so as part of a carefully considered long term portfolio. In other words, I think it’s best to buy something for a real reason rather than because the fed might cut rates this year. Buying things based on the short term orthodox outlook for rates is more of a trade (and likely just a punt) rather than an investment.

Also, I’m not sure a US Small Cap fund is the best tool for a bet on fed rate cuts anyway. If I was to make that trade, I’d use the high hype, high PE, large cap market darlings - the Nasdaq would be my weapon of choice.

US small caps, most small caps really, are not exactly a momentum trade. They are actually more of a value trade, with far better earnings yields than US large caps at the moment. They are actually historically cheap by conventional measures and abnormally so in relation to large caps. Perhaps more of a contrarian play than a rate driven momentum play.

Don’t get me wrong, there is IMO a good reason to hold small caps, US or otherwise. I have around 10% of my total invested wealth in them. I use various funds in different accounts depending on the availability on each of the platforms I use. I do use a US small cap fund in one account. I use R2SC, an ETF that tracks the Russell 2000. It’s very cheap for a small cap tracker at 0.30% and the spread isn’t too bad either. Not much evidence that active managers outperform in this space, so no need to incur the extra costs associated with an actively managed fund (that will likely just be concentrated in the expensive stuff anyway).





5 users thanked DIY Investing for this post.
David Robson on 25/01/2024(UTC), smg8 on 25/01/2024(UTC), Tim D on 25/01/2024(UTC), Mr TIPS on 27/01/2024(UTC), Chans on 06/02/2024(UTC)
Thrugelmir
Posted: 25 January 2024 16:51:04(UTC)
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Joined: 01/06/2012(UTC)
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David Robson;293809 wrote:
New investor, and thinking of investing in a US Small Cap Fund.
Been recommended FTF Royce US Smaller Companies to look at.


What was the source of the recommendation? Unusual choice for a new investor.

Out of curiosity what else does your portfolio contain.
1 user thanked Thrugelmir for this post.
David Robson on 25/01/2024(UTC)
David Robson
Posted: 25 January 2024 17:35:29(UTC)
#8

Joined: 16/04/2021(UTC)
Posts: 18

Thrugelmir;293838 wrote:
David Robson;293809 wrote:
New investor, and thinking of investing in a US Small Cap Fund.
Been recommended FTF Royce US Smaller Companies to look at.


What was the source of the recommendation? Unusual choice for a new investor.

Out of curiosity what else does your portfolio contain.


Hi
I read an article talking about US Small Caps being good value at the moment and they recommended this fund.
I only currently have 3 ETF's INRG,AIAG,SMT
Thanks
Thrugelmir
Posted: 25 January 2024 18:12:16(UTC)
#13

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Interest rate cuts are likely if the economy turns down. Not going to return to the low levels seen in the recent past. As will remain at least a 1% above the rate of inflation. With inflation not yet beaten. We will again return to previous era's of fluctuating base rates.

Should add that higher interest rates haven't fully hit home yet. Still permuting through the real economy.
TJL
Posted: 25 January 2024 18:47:20(UTC)
#12

Joined: 14/03/2011(UTC)
Posts: 1,630

David Robson;293845 wrote:
Thrugelmir;293838 wrote:
David Robson;293809 wrote:
New investor, and thinking of investing in a US Small Cap Fund.
Been recommended FTF Royce US Smaller Companies to look at.


What was the source of the recommendation? Unusual choice for a new investor.

Out of curiosity what else does your portfolio contain.


Hi
I read an article talking about US Small Caps being good value at the moment and they recommended this fund.
I only currently have 3 ETF's INRG,AIAG,SMT
Thanks


I would say that you need to provide more information David.
Looking at your earlier posts, there appears to be a bigger picture involved.
Newbie
Posted: 25 January 2024 19:34:08(UTC)
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David Robson;293845 wrote:
Thrugelmir;293838 wrote:
David Robson;293809 wrote:
New investor, and thinking of investing in a US Small Cap Fund.
Been recommended FTF Royce US Smaller Companies to look at.


What was the source of the recommendation? Unusual choice for a new investor.

Out of curiosity what else does your portfolio contain.


Hi
I read an article talking about US Small Caps being good value at the moment and they recommended this fund.
I only currently have 3 ETF's INRG,AIAG,SMT
Thanks

New investor !!
You have either dived in with specialist sector bets with those 3 holdings, or there is a bigger picture.
Nothing wrong with those as per se, but if they are your only holdings then is it punts you are taking rather than investing - they can and do swing violently so you need the stomach for it - 50% downward pulls can be expected with those type of holdings - SMT at its peak was above £15 per share, it went down to £6.92 recently. In the GFC it went from £7 per share down to 96p. Before that it went from £3 to 60p and stayed relatively flat - It is all well if you are able to ride that out and continue to hold when it tanks. Today's share price for SMT is just a tough above what it was in 2006

Those three normally form satellites around a broader core holding.

( I am not knocking SMT - I have had for 3 decades just highlighting the experience and voltaile nature of it)
2 users thanked Newbie for this post.
MartynC on 25/01/2024(UTC), David Robson on 28/01/2024(UTC)
DIY Investing
Posted: 25 January 2024 20:13:23(UTC)
#9

Joined: 29/09/2018(UTC)
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David Robson;293845 wrote:


I only currently have 3 ETF's INRG,AIAG,SMT



Bloody hell!

None of those are core holdings.

INRG and SMT = burst bubbles unlikely to re inflate

AIAG = Prime candidate for the next bubble that will most likely never re inflate.

I think you need to go back to the drawing board and construct a proper plan for your portfolio.

Where are you getting your info from currently?

And how long have you been holding this stuff?

1 user thanked DIY Investing for this post.
MartynC on 25/01/2024(UTC)
Shetland
Posted: 25 January 2024 22:04:35(UTC)
#3

Joined: 13/03/2015(UTC)
Posts: 1,242

Dexi;293814 wrote:
ISP6 is a US small cap ETF , might be an idea to check out how the fund compares to a passive alternative .


Do you know the full name of ISP6 as HL doesn’t recognise it
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