Audrey's point reinforces what never ceases to surprise me. While the following is anecdote, not data, at several points I've been a bit stunned at how quickly the markets "correct," sometimes after many years of underperformance.
1) I just looked at the portfolio and noticed Fidelity International Small Cap. It's in a Brokerage 403b that I started in March 2012 and was one of the worst performers in the account. However, this year it's up more than 30% and passed the other funds in 5 year performance (Fidelity Small Cap Discovery last year was the leader by quite a bit; it's not done well this year.)
2) I also have held Vanguard International Value in DW's rollover IRA for almost 10 years--another underperformer, compared both to international and of course to US large caps. This year, again, 30%. I had an International Growth fund and wanted to try the Value premium; luckily I remembered this intent.
3) In 1999, to "smooth" out the volatility of Fidelity Select Biotech, I bought Select Healthcare, which had done well at lower volatility. It, frankly, sucked for about 4-5 years. Again looking at it in another Brokerage 403b started about 5.5 years ago, it has been the best performer for the last 5 years.
I like to look at 10 year returns for funds rather than shorter terms (the problem with this is that often the management has changed). And looking at 10 or 15 year returns reinforces that the international diversification and the small and value premium often requires a lot of time to work--much longer than most peeps have the patience to realize.
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Originally Posted by audreyh1
Yep. I've definitely had some asset classes lag for 3 years, rebalancing into them year after year, then lol and behold, bam! they surge way ahead of the others and its time to trim. That always feels rewarding.
But I do notice many folks have usually given up on that asset class by the three year mark and put the funds into something else.
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