- Funds that track the S&P 500 index remain overcrowded, according to Bank of America’s Savita Subramanian.
- She told CNBC on Monday that investors should go long small-cap value stocks.
- “We are now in a good spot where small-cap value benchmarks are cheap relative to large-cap stocks at a record price,” she said.
Bank of America’s Savita Subramanian says the S&P 500 remains overcrowded and investors should look beyond broad market index tracking funds.
Legendary billionaire Warren Buffett has often preached that the average retail investor should buy and hold an index fund that tracks the S&P 500.
But it no longer looks like the most attractive bet. Long term, he is also responsible for BofA Securities’ US equity and quant strategy. told CNBC on Monday.
“I don’t own an index now,” she said. “I would be selective, and being selective doesn’t mean you have to pick stocks,” she said.
That could mean buying sector ETFs, small-cap focused Russell 2000 Indexes, or “rest of the world” funds, she added.
The problem with buying the S&P 500 index fund is that “there is a huge risk of becoming the most crowded ticker in the world,” Sublamanian warned.
As passive investing overtakes active investing, more money is shifting to funds tracking the S&P 500 and even pension funds, she explained.
But the large-cap growth stocks that currently dominate the S&P 500 have already hit their prime, and now is the time to buy small-cap value stocks.
Subramanian’s recent comments followed similar sentiment last September, when he said the S&P 500 was “the worst” in the short term, but fine in the long run. suggests short-term play at
But on Monday, she showed that small-cap value is also a long-term strategy.
“I think what you want to do in the long term is buy the value of small caps. [and] “Set it and forget it,” Sublamanian said.
