I’ve recently been looking at more small caps given the extremely divergent nature of small cap PEs and mega cap PEs. As indexes, QQQ is trading around a 30 multiple while IWM is trading at a multiple of 10.
THAT SAID- the problem I am seeing with investing in IWM is that companies that are truly successful and on path to become mega caps do not stay in the IWM. They always graduate to be featured in the SPY and they take that growth with them.
I have invested a little bit into IWM at this point and feel like it’s safe to continue to do so, but the more I think about it the more I think it’s better to pick and choose your small/mid caps and abandon the index.
Does anybody have good reason for me to continue to invest in IWM? Am I missing something? Talk to me people of r/stocks.
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