if you've wanted to make money in the past decade the place that you've wanted to be has to do with
tech stocks and that has been even more true in the past year we the pandemic that hit and
the stay-at-home stocks which were mainly the tech-heavy stocks that didn't rely on
physical retailers did really well in 2020 and that's why we had an incredible year for
the tech heavy Nasdaq which is the index that follows the 50 largest tech stocks and with
companies like Apple Stock (AAPL Stock) amazon Microsoft Stock (MSFT Stock) google being up
significantly in 2020 tech has been the place to be for the past year even though some of the
earnings have not gone up the same way the stock prices have increased significantly for example
Apple Stock (AAPL Stock) was up 80 last year but the earnings per share was only up three percent
and revenue was only up 2.5 but that is a different discussion to have in 2020 the Nasdaq
which is the tech heavy index as I mentioned had a record you're returning 44% in 2020 and looking
how it's done since 2012 that's a very impressive year and the best it's seen during that period
but so far in 2020 the Nasdaq has not been the top index when it comes to overall returns and so if
tech stocks are out so far in 2021 what is the new leader and is there a way to capitalize on
that and have the type of success that we saw with the Nasdaq in 2020 with this new index in 2021
the stock market has seen a fantastic recovery from the volatility that we saw at the start of
the year it resulted in last week being the best week on the stock market since early November so
we've had a very nice bounce back after the incredible chop for the first couple weeks
of January we saw the Dow jones jumped 3.9 percent the s p 500 up 4.7 percent I mean Nasdaq was up 6%
those are all incredible weeks and it's hard to kind of see those gains and be like oh yeah
something probably did better but an under discussed index is the Russell 2000 and that
was up 7.7 percent during that week the Russell 2000 has been the top performing index in 2021
being up 17 compared to Nasdaq that's only up 7.7 percent the s p 500 is up 5 and the Dow jones
only being up 3.8% so far the Russell 2000 is outperforming every major indices so far in 2021.
a tweet I saw said that one-third of Russell 2000 stocks are up 20 this year and that's
more than there was for the entirety of 2020. so a lot of these stocks on the Russell 2000
are up significantly which is not something that we've seen in 2020 so what the heck is
the Russell 2000 and why is it doubling the Nasdaq so far in returns in 2021 because for most people
that haven't been around the stock market for very long the indices that you think of you
think of the Nasdaq, the Dow, and the s p but the Russell 2000 is this underappreciated index that
for the most part usually underperforms overall market but during certain scenarios like what
we're seeing right now it has been a top performer and we've seen this in the past
so we're going to be talking about that so when you think of the stock market you think of the
large caps and the small caps which is kind of how I think of it the general definition for
a large cap is a stock that has a market cap of over 10 billion dollars and there's the mid-caps
which are 2 to 10 billion and then you have the small caps which are a market cap of 300 million
to 2 billion so when you think of the most common stocks to talk about for maybe the safer investor
you think of stuff like Microsoft Stock (MSFT Stock) uh Apple Stock (AAPL Stock) these all have
market caps in the trillions of dollars these are the ultra the ultra-mega huge market cap stocks
but the ones we don't talk about as much are the smaller cap stocks and when I looked at my overall
portfolio I was wanting to answer the question do I own any small cap stocks and the only stock that
I could think of that might be in there with Zynga Stock (ZNGA Stock) would be ticker symbol $ZNGA
and it turns out it has a market cap of $12 billion dollars meaning that it is still a
large cap stock even though it's on the lower end of a range so I don't own any small cap stocks in
my portfolio does this mean that small cap stocks are a bad place to invest it depends there's a lot
of risk involved but as I’ve shown so far in 2021 these small cap stocks have been the top
performing index and that begs the question would I ever consider buying individual small cap stocks
the short answer is no the long answer is it's complicated the reason I say that is if you've
been on the channel for any part of the past year I always talk about I don't like investing
in industries that I don't fully understand or specifically picking individual stocks
we talk about stuff like pharmaceuticals bio health even the weed stocks
I usually prefer to go with something like in an etf that follows the overall market so
that I can get the benefits of the overall sector going up but I don't have to worry about picking
a dud from the overall market that I don't fully understand
so historically small cap stocks have outperformed places like the s p 500 does
that mean that they're a safer place to invest in somewhere like the s p 500 no and there's a
pretty simple explanation of why what's the most amount of value that a stock can lose it's 100%
but the upside is definitely higher than 100 percent so when you have an index that has 2000
individual stocks yes you're going to have plenty of stocks that fail and do absolutely horrible
but then you're going to have ones that are going to be outperforming the overall stock market
significantly and since you have a higher upside potential it's going to have a total return that's
usually going to be outperforming the averages so when you have something like a stock that
has infinite upside potential you really have to look at how the numbers are being skewed because
if you have a stock that's down 100 and then you have a stock that's of a thousand percent
if you average them out it's going to look like on average the stocks went up a bunch
but in reality you had one that went up a lot one that went down and lost 100 of its value so is it
safer to buy these individual stocks no the reason that you have this out of performance is because
you have stocks that can do really well and then you have a cap for how poorly the stocks can do
so Russell 2000 stocks are more volatile than the normal stocks you'd find on the stock market and
one of the problems that I have with individual stocks as well is I only like buying into stocks
that I can find significant information about because I think the more information you can find
on a stock and in addition the more information that other people are willing to talk about that
stock makes you a lot more confident for buying for a long-term potential if I find a stock that I
really like but I can't find anyone online talking about it that's usually a pretty big red flag for
me I want to be able to just type in the ticker symbol on google and come up with articles that
talk about the recent earnings reports the outlook for the upcoming year and just have
a discussion about what's going on with a lot of these Russell 2000 stocks you're not going
to be finding the amount of articles that that I would prefer to find for a large cap stock so it's
one of the other reasons why I wouldn't really consider buying a small cap stock specifically
but that doesn't mean that they shouldn't be a part of your portfolio just like with my views on
the cannabis industry I think an etf is the best way to invest in a super volatile type of market
maybe you watched my video last week where I talked about the solar industry and why I talked
about how I really liked enphase energy stock (ENPH Stock) ticker symbol $ENPH that's up 11,000%
in the past five years which is crazy does it have a lot of risk yeah it absolutely does
so I could consider investing into a solar etf which is the ticker symbol $TAN it allows you to
capitalize on the upside potential of the industry but doesn't have as much of a risk because
as I always talk about with the law of large numbers when you have more numbers
it makes it so that the resulting number is closer to the actual mean because say you pick
one specific stock from the solar industry you can get the top one you can get the bottom one
but if you get 100 of the solar stocks it's going to average out closer to what the actual mean
should be that's why I’ve talked about why the arc etfs are so great because they have a variety
of stocks that benefit from them increasing in value but they have enough variety where they
don't get weighed down by a specific loser that's underperforming compared to the overall market
and that's what you have with $ARKK which is their just general innovation etf when I show their top
10 holdings what do you notice the largest waiting ones have had an incredible 20 20.
Tesla stock (TSLA Stock) was up 743 percent in 2020 Roku Stock (ROKU Stock) is of 148%
Teladoc stock (TDOC Stock) was up 140% and square stock (SQ Stock) was up 250 percent
so you can still have incredible returns with etfs it's usually the problem of when you
find these normal etfs there's so many stocks involved in them that it's not going to have
you know 100 return but with the Russell 2000 where you're trying to capture these whole
market of small cap stocks I don't think you're trying to invest in something that's going to
double in a year you're trying to have more exposure to an industry that maybe you had pretty
much zero exposure to in the past so if I was considering buying into a an etf that follows the
Russell 2000 in my mind I can only think of two decent picks to pick from and it really depends on
if you have a preference in the company that runs these etfs because I’ll put these two etfs side by
side they follow the market specifically it's not like you have to pick one to have a guess
of which one's going to outperform the other they're pretty much going to follow the market
specifically so the first one is the iShares Russell 2000 etf which is the ticker symbol $IWM
and then the other one I would consider buying which is the vanguard etf which is $VTWO
so if you have a preference between eye shares or vanguard that's how I would decide I really don't
care I’d probably just flip a coin because it doesn't matter too much to me but overall I think
the Russell 2000 is a very interesting place to consider investing going into 2021. for the past
decade the tech stocks have been the leaders in the overall market and then with 2020 going
into the pandemic these stay at home stocks and specifically the tax stocks did incredibly well
are we going to be seeing a changing of the guard where tech stocks are no longer the market leaders
probably not but I think the Russell 2000 is an underappreciated place to invest in the overall
stock market these are not household names that you can you know talk to your friends about
or find a lot of information but if you allow yourself to invest into an etf that follows these
2 000 stocks because of the law of large numbers on average you're not going to be putting yourself
to as much risk as picking one of these specific stocks because as I mentioned you could pick the
loser of the 2000 stocks but if you're averaging out the 2000s on average they have outperformed
the s p 500 so I think Russell 2000 is an interesting way to consider investing in the stock
market and something I’m considering at this point but I just think that seeing the trend of the
Nasdaq not being the top performing index is very interesting to watch and it's going to be I think
it's going to be unlikely that the Nasdaq is going to be lagging the Russell 2000 for the entirety
of 2021 but at this point that's the story that we've seen in the overall stock market and while
part of investing is looking forward part of its looking back I think it's always interesting to
see these changes in how the overall stock market is working because Nasdaq’s been the
top dog for a while and quietly the Russell 2000 has come in and been the top performing indices
for 2021 and it's double the Nasdaq at this point so let me know if you'd ever consider
buying an individual stock from the Russell 2000 and let me know if you would consider buying a
Russell 2000 etf because I think it's a very interesting way to invest in the overall stock
market thanks for watching hope you guys have a great day and I will see you in the next video