More Than Three out of Five Investors Diversify Their Portfolios By Market Cap


This month’s Asset Allocation Survey special question asked AAII members if they intentionally include stocks with different market capitalizations (large-cap, mid-cap, small-cap) in their portfolios. Slightly more than three out of five respondents (61%) say yes, they do. Many of these respondents say they do so for diversification purposes. Others say their exposure occurs through mutual funds or exchange-traded funds (ETFs). Exposure to small-cap stocks varies, with some respondents describing their portfolios as being more large-cap oriented, while others say they are more focused on small-cap stocks.

Just under 29% of respondents say they don’t purposely diversify by market capitalization. Many of these respondents say they focus specifically on dividends, while several others say they either judge stocks by their characteristics or seek out factors other than dividends.

Here is a sampling of the responses:

  • “Yes, of course. It’s part of good diversification.”
  • “Not intentionally. I pick stocks based on merit, and capitalization does not affect my decision.”
  • “Yes, mostly through my mutual funds rather than individual stocks.”
  • “Mainly large- and mid-cap stocks, and a small percentage of small-cap.”
  • “No, I’m a bottom-up stock picker. I don’t preselect by category, but just look for the best and most timely stocks.”

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