The consensus believes that the greatest risk comes not from holding stocks, but from not holding enough of them. Passive investing and momentum investing are the primary manifestations of this belief. During the later stages of a bull market, they are one and the same.
Value’s excess performance vanishes occasionally—often for longer than we’d like. But, these short-term cycles of underperformance are what ultimately ensure value’s long-term outperformance.
Similar concerns are raised during every cycle. And yet, each period of underperformance has been followed by exceptional outperformance.
The market has always been good at reallocating capital from the careful to the careless.