Why you gotta fight with me at Cheesecake?
You know I love to go there. C’mon, even Drake likes The Cheesecake Factory and its notorious 30-something page menu of non-stop “WTH, why do they have this?”. Garden omelet, check. Chicken teriyaki, check. Fried avocado eggrolls, check. Sure, this place can be an easy target but guess what, this easy target and its 6,000-word dissertation of a menu is up 40% this year. And you don’t own it.
I say that with conviction because $CAKE isn’t included in the S&P 500, nor the DOW, nor the NASDAQ 100. These three tend to be the most reported indices in the news, and what comprises most of our portfolios. You hear “diversify your portfolio” and you think “Buy the S&P 500”. This isn’t wrong, but there’s more to the investment world: Enter $CAKE and 1,999 other companies that comprise the Russell 2000 index of Small Cap stocks.
The Russell 2000 is up nearly 50% over the last year, compared to the S&P 500’s 34%. This isn’t shocking. Historically, small-cap stocks tend to outperform large-caps (read S&P 500) when projected economic growth is above its long-term average. That’s the world we’re (allegedly) living in for the next 12–24 months.
A well diversified portfolio should, IMO, carve out space for small caps. Even though, yes, the S&P 500 has outperformed the Russell 2000 over the last five years, mainly thanks to the Tech behemoths known as FAANG. However, that’s exactly the point. Asset diversification means having exposure to BOTH to give your portfolio the opportunity to thrive in all economic climates.
And it shouldn’t stop there — what about international stocks, oil, gold, bitcoin? Yes, I include it all. Disclosure: I’m personally sitting at 50% Large Cap, 20% Mid & Small Cap, 15% International, 15% Commodity, Crypto, Cash & Other. Much like the $CAKE menu, our investment horizon is long. And in the long term, nothing is constant. So even with Large Caps having its moment today, order accordingly for tomorrow.
TLDR: The Cheesecake Factory doesn’t always suck.
What I’m listening to: For a Friday (and Saturday ahead) of distraction-free productivity, here’s 12+ hours of uninterrupted atmospheric trance by RÜFÜS & Friends.
Obvious Disclaimer: I am not a financial advisor. All opinions expressed in this article are solely my own opinions and do not reflect the opinions of any other entities of mine. This article is for informational purposes only and should not be replied upon for investment decisions, advice, or recommendations. I may maintain positions in any of the securities mentioned this article.
