How to Money · Wednesday, July 15, 2026
Paul Merriman asserts that small-cap value stocks have historically outperformed the S&P 500 and also act as a significant diversifier. He cited a study showing that in many periods where the S&P 500 lost money, small-cap value stocks still made gains. Merriman suggests that a portfolio allocation of 50/50 between the S&P 500 and small-cap value could be a prudent strategy for long-term investors.
“So it isn't just that small cap value gives a better long term return that we're looking at here, but it's also a hugely historically successful balancing kind of of that's what you're after.”
“I mean, you have why do you have many stocks in a portfolio because you can't trust one might you want some small and some value instead of having everything in large and mostly growth. Yes, you would, because it's more diversification.”