Saturday
"Smallcap did 41 percent. Microcap is even smaller. So microcap must do more." Pulled up the four cap-curve cards side by side. The answer was nothing like the question expected.
Smallcap 5Y CAGR
41.03%
Max drawdown -22.35 percent. Sharpe 1.58.
Microcap 5Y CAGR
40.56%
Max drawdown -26.44 percent. Sharpe 1.53.
The trade you actually made
Step down a notch . give up 0.47 pp of return . accept 4.09 pp deeper hole
-4.09 pp
The deeper you go down the cap curve, the less you get paid for it.
Same backtest engine. Same equal-weight. Same fortnightly rebalance. Return flattens. Drawdown widens.
Swipe . the four-row read →