Investors often struggle with the question of how to balance their portfolios between large-cap and small-cap stocks. According to a recent article in The Economic Times, one strategy that can help in long-term investing is to maintain a ratio of 4 large-cap stocks to 1 small-cap stock, all with the right PEG ratio.
The PEG ratio, which stands for Price/Earnings to Growth ratio, is a metric that takes into account a company’s growth prospects in addition to its current valuation. By focusing on stocks with the right PEG ratio, investors can potentially identify companies that are undervalued relative to their growth potential.
DailyBubble agrees with this strategy, as it allows investors to diversify their portfolios while also focusing on companies with strong growth prospects. Large-cap stocks can provide stability and consistent returns, while small-cap stocks offer the potential for significant growth.
By maintaining a ratio of 4 large-cap stocks to 1 small-cap stock, investors can strike a balance between stability and growth in their portfolios. This approach allows investors to benefit from the strengths of both large and small companies, while also mitigating some of the risks associated with investing in either category exclusively.
In conclusion, DailyBubble believes that maintaining a ratio of 4 large-cap stocks to 1 small-cap stock with the right PEG ratio can be a valuable strategy for long-term investors. By focusing on companies with strong growth prospects and a solid valuation, investors can potentially achieve better returns over time.