Large-cap exchange-traded funds, which tend to be more defensive than small and medium-sized company exchange-traded funds, have suffered their fair share this year.
The iShares Morningstar Large Core Index (JKD), iShares S&P 500 Index (IVV), Vanguard Large Cap ETF (VV) and the iShares Dow Jones U.S. Index (IYY) have declined 35.6%, 39.3%, 41.2% and 41.8% this year, respectively. These results are in line with the minus 41% average return by large-blend mutual funds tracked by Morningstar.
Some money managers are favoring large-caps. "It's a good time to be in large-caps versus small-caps right now," said Kelly Campbell, founder and principal of Campbell Wealth Management. "They are net creditors versus being net debtors."
Campbell's largest positions have been in large-cap equities. As of Oct. 23, he had a portfolio that included a 16% allocation in large-cap growth stocks, 16% in large-cap value and 12% in large-cap foreign equities. "If I am going to be in the stock market at all right now, I want to be in large-caps," he said. "When the market turns around, small-caps may begin to outperform large-caps, but it's not happening yet."A couple of benefits to ETFs are lower taxes and access to a wide array of asset classes. "ETFs can do in-kind transactions, which are a significant advantage," he said. "You can also use ETFs to get into a lot of types of non-traditional investments, which can reduce the correlation of your returns to the overall stock market." Rafael Resendes, portfolio manager of the Toreador Large Cap Fund (TORLX) and co-founder of the Web site ValueExpectations.com, agrees with Campbell on the attractiveness of large-cap equities. "Over time, large-cap stocks have proven to be less risky than small-cap stocks," he said. "They offer a higher degree of safety as well as the benefit of higher returns than fixed-income investments."
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV