The Intelligent Investor's Almanac
Your Bi-Weekly Guide to Markets, Movements, & Money.
Presented By Ken Majmudar & Ridgewood Investments
Issue 14 • September 18 to September 30, 2025
Never miss another valuable edition of The Intelligent Investor's Almanac again.
Your TL;DR Institutional Intelligence
- Planning Insight: A portfolio anchored to U.S. large caps is driven by its own specific set of dynamics. Adding assets tied to multiple and varied dynamics builds resilience for the long run in the portfolio.
- Action Step: Check whether your portfolio has alternative investments including digital assets, small/micro-caps, and international equities. Even small allocations can shift long-term outcomes.
Wealth Preservation: Concentrated U.S. exposure leaves investors vulnerable to changing market leadership and valuation risks. Asset classes with lower correlations and independent dynamics help preserve wealth across evolving markets.
- Strategic Response: Evaluate your alternative asset exposure, and reach out to us if you are interested in having a conversation on which types of alternative investments.
The Value Investor
Ken Majmudar, CFA & Founder of Ridgewood Investments
“Diversification is the only free lunch in investing.”
— Harry Markowitz
Many investors think they’re diversified just because they hold a large number of U.S. stocks. In reality, that’s concentration under a different name.
True diversification comes from owning investments that earn money for different reasons and operate on different cycles. When done right, this helps keep risk under control while also allowing portfolios to grow in different ways over time.
At Ridgewood, we view diversification not as an abstract concept but as an anchor for families seeking to preserve capital over the long run. Alternatives such as digital assets, smaller companies, and international exposure may feel unfamiliar, but they represent sustainable drivers of innovation, growth, and value that can enhance portfolio resiliency, especially when market leadership shifts.
In this issue, we look at three areas that can play an important role in portfolios today: digital assets, small and micro-cap equities and international exposure. Each provides its own way to compound wealth, and each is influenced by different drivers than the large U.S. stocks that dominate the spotlight.
Alternative Investments: Broadening the Opportunity Set
For many years, investors believed that holding a mix of stocks and bonds was enough. That worked in a world of falling interest rates and steady growth. But the past few years have shown the limits of that approach. In 2022, both stocks and bonds fell at the same time. In 2023 and 2024, most of the market’s gains came from a small group of very large technology companies.
By mid-2025, just 10 companies made up about 40% of the S&P 500’s value, a level of concentration not seen since the dot-com bubble.
As the chart below shows, no asset class dominates every year, which is why portfolios benefit from including alternative investments.
Note: Past performance does not guarantee future returns. The historical performance shows changes in market trends across several asset classes over the past fifteen years. Returns represent total annual returns (reinvestment of all distributions) and do not include fees and expenses. The investments you choose should reflect your financial goals and risk tolerance. All data are as of 3/31/25.*
Digital Assets
Digital assets are investments built on blockchain technology. The best-known examples are Bitcoin and Ethereum, but the category now includes stablecoins and tokenized real-world assets. Unlike traditional stocks or bonds, their value is driven by adoption, scarcity, and technology use rather than company earnings or interest rates.
Bitcoin, with its fixed supply, has gained interest from investors concerned about inflation or the loss of value in traditional currencies. Ethereum supports a broad network of applications and payments, while tokenization is starting to make once-illiquid assets like real estate or private credit easier to trade. By 2025, more than $400 billion worth of traditional assets had already been tokenized, showing how quickly this market is moving from speculation to practical use.
Institutional adoption is also expanding. Major banks and asset managers now provide custody and ETFs, and surveys show over 50% of professional investors hold at least some exposure. Still, the trade-off is volatility. Prices can swing sharply, and regulation is evolving, which is why most investors keep allocations small, often 1% to 5% of their portfolio. Even at that level, digital assets can offer diversification and exposure to long-term innovation without adding too much risk.
Role in Portfolio:
Although highly volatile, digital assets have been among the top-performing asset classes of the past decade. For example, Bitcoin’s average annualized volatility over 2014-2024 was around 65–70%, compared to about 15–20% for the S&P 500. Even so, Bitcoin’s returns were strong enough that long-term investors accepting periodic 50%–80% drawdowns often saw significant compounding over time. What matters is that crypto returns are often driven by adoption and network growth, not earnings or interest rates, which tends to keep correlation to stocks and bonds low.
According to industry research, even a 1% allocation delivers large improvement in risk-adjusted returns. Larger allocations increase volatility but hold the potential to improve long-term compounding with regular rebalancing. In practice, it works best as a small allocation which allows for some upside exposure while keeping risk under control.
Investing in digital assets requires prudent allocation and oversight. The Ridgewood Digital Assets Strategy is designed to provide structured exposure to leading digital assets such as cryptocurrencies.
Small & Micro-Cap Equities
Small-cap stocks represent public companies with a market capitalization between $250 million and $2 billion, while microcaps stocks are typically defined as companies with a market capitalization between $50 million and $250 million. Many are still in their growth phase and are not widely followed by Wall Street analysts. Because they are less followed, their prices don’t always reflect their true value, creating opportunities for investors to profit from it.
Historically, smaller companies have often delivered stronger returns than larger ones, though with more volatility. Unlike mega-cap stocks that are driven by global technology and consumer themes, small and micro-caps are more dependent on the domestic economy and sectors like industrials, financials, and healthcare. This makes them a helpful counterbalance in portfolios that may otherwise rely heavily on large-cap growth.
As of late 2025, the case for smaller companies is especially strong. Valuations are priced much cheaper to large-caps, with the discount at levels previously seen in 1999-2000. Over long periods, small-cap stocks have historically delivered higher returns relative to large-caps, with higher earnings growth but greater volatility. The last decade however has favored large-caps due to technology-driven gains, but historically small-caps tend to outperform during recoveries and periods of economic expansion.
If the Federal Reserve starts reducing interest rates, these companies could benefit more than their larger companies, since they are more sensitive to borrowing costs and recoveries in the economy. Lower interest rates tend to improve financing conditions, and smaller companies, often more dependent on bank loans or credit markets, can see a substantial increase in profitability and expansion opportunities.
Like any investment, smaller companies carry risks, they can be more volatile, and many will not succeed in scaling to mid or large caps. Liquidity can also be limited, making it harder to buy or sell quickly. For these reasons, diversification is essential. For investors who are prepared for the long term, holding a group of small companies can provide access to growth that is often missed in a large-cap dominated market.
Small-cap investing requires patience, diversification, and a selective approach, as not every company will scale successfully. To enable investors to participate through a disciplined framework, the Ridgewood Small & Micro-Cap Strategy focuses on uncovering opportunities in small and micro-cap equities that may be overlooked by larger market participants.
Role in Portfolio:
Since 1926, U.S. small-caps have returned about 11% annually versus 10.3% for large-caps, with higher volatility.
Their cycles also differ: small-caps often outperform during early recoveries (e.g., early 2000s, early 1980s) and underperform in late-cycle booms or higher interest rates periods (e.g., 2022). Today, they are trading at notably low valuations relative to large‑caps. The Russell 2000 index currently trades at around 13–14× forward earnings versus nearly 20× for the S&P 500,a historically wide gap that highlights the relative value available in smaller companies.
For portfolios, a 5-10% allocation broadens the equity opportunity set, adds exposure to sectors like industrials and financials, and holds the potential to diversify long-term returns.
International Exposure
International exposure gives investors access to opportunities beyond the U.S. While U.S. stocks make up about 60% of the global market, the other 40% is spread across international markets. By allocating a portion of capital abroad, investors can share in the growth of other economies and reduce reliance on just the US economy.
As of 2025, this case has become especially relevant. U.S. equities remain concentrated in a few large technology names, while international markets trade at lower valuations and are driven by different economic forces.
Recent policy shifts under the Trump Administration have also introduced a degree of uncertainty in US markets. While the U.S. continues to attract capital as the world’s largest and most liquid equity market, trade policies, regulatory changes, and fiscal debates have reduced confidence among global investors.
India is the fastest-growing major economy, with GDP rising ~7.8% in the first quarter of fiscal 2025–26, up from 6.5% a year earlier. Strong consumption, investment, and reforms continue to highlight its leadership among major markets.
Indian equities have reflected this growth with Nifty 50 has compounded at ~16.8% annually over the past five years. For investors looking to participate in this long-term growth story and seek unique access beyond U.S. markets, our Ridgewood India Strategy provides a dedicated way to participate in these opportunities.
Role in Portfolio
International equities help diversify portfolios because their cycles, currencies, and policy environments differ from the U.S., and their performance often diverges from U.S. markets.
Summary: Strategic Role of Alternative Asset Classes
Here’s to building lasting wealth,
Ken Majmudar, CFA
Founder & Chief Investment Officer Ridgewood Investments
P.S. If you’re ready to explore how our institutional-grade investment approach can work for your portfolio, let’s schedule a time to talk below.
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- Analyze your current portfolio positioning
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Important Disclosure: Ridgewood Investments is a registered investment adviser. This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results.