9.10How should investors compare these categories?
1What is it?
Choose a mix based on goal, time horizon and how much fall you can stomach, not on which did best last year.
2Why does it exist?
Different sizes lead at different times. A sensible mix balances growth and stability.
3Diagram
| Investor | Example mix (illustrative, not advice) |
|---|---|
| Beginner, 5+ years | 70–80% large cap / index, 20–30% mid cap |
| Moderate, 7+ years | 60% large, 25% mid, 15% small |
| Aggressive, 10+ years | 50% large, 30% mid, 20% small |
4Practical use
Compare categories by risk-adjusted returns (Sharpe, drawdown) over full cycles, and by how they behaved in falls like 2008, 2018–19 (mid/small-cap correction) and 2020.
5Quick revision
- Mix by goal, horizon and risk tolerance.
- Compare full cycles, not one year.
6Knowledge check
Q1. Should a beginner put 80% in small caps?Show answer
Generally no.
Q2. What should drive your mix?Show answer
Goal, horizon and risk tolerance.
Q3. Why compare over full cycles?Show answer
Each category leads at different times.
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