Are large U.S. stocks your best bet for 2011?

“It’s a tough call; small caps are nimble to react and benefit from economic rebounds,” says Eduardo Ramos, of Freedom Advisory, in Guaynabo, Puerto Rico.

The stock market has been compensating small companies handsomely during the past three years, and may keep up the pace, but large caps have been lagging for the last decade.

“Provided the economy is truly turning around and their profits continue to grow, it may be their turn, especially as money flows out of bonds,” Ramos told Financial Planning.

Jim Corridore, an equity strategy analyst for Standard & Poor's, said that he think large caps are set to outperform small cap in the coming year.  And if you are looking for a large cap fund, a core fund, which invests in both growth and value, can be a solid choice. 

When Corridore screened for large cap core funds that  hold at least $500 million in assets, he came up with three interesting picks: Northern Multi-Manager Large Cap Fund, Oakmark Select Fund and TIAA-CREF Growth & Income Fund (Retail). All have well-diversified portfolios, no front-end sales loads and top rankings among their peers in the last one and three-year periods.  

Although these funds aren’t especially expensive, none of them are rock-cheap.  No one knows how well a fund will perform, but we do know that its fixed costs will lower those returns. On the reasoning that it’s best to control what you can, investors might prefer core funds like Vanguard Growth & Income and Schwab 1000 Index, which offer expense ratios well below one percent.

Based on cost and performance, Morningstar gives good reviews in its “large cap blend” category to Oakmark, Sequoia, Longleaf Partners, American Funds, Clipper, and Vanguard, among others. 

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access