A Surfboard for the SmallCap Seas
Posted on Wednesday, November 12, 2014
Investors focusing on small-cap stocks know the power of differentiation in a portfolio. A smart mix of smaller stocks can offset broad trends that affect more mainstream stocks. Although small-cap stocks typically are pricier than mid-cap and large-cap companies, historically they offer a higher return than larger companies. From 1926 through 2012, the smallest fifth of all stocks returned 11.5% versus 9.7% for the largest fifth, says The Wall Street Journal, citing Wharton School economist Jeremy Siegel. Seen from another perspective, the small-cap index, the Russell 2000, surged 163% from January 2000 through Oct. 10 (including dividends), while the S&P 500 returned only 75% during the same period, the WSJ reports.
Surges and downturns can appear to have a more pronounced effect on small-cap stocks during significant market gyrations, so a decline in small-cap stocks also could signal tempting bargain-hunting opportunities. But investors in this sector are wise to think carefully before diving into small-cap stocks. SmallCap Informer
specializes in keeping a steady eye on investor opportunities to buy and sell, based on analyzing fundamentals and keeping a seasoned eye on long-term trends. In each issue, the editors provide an overview of the economic trends from the perspective of small-caps, plus insights on specific companies. Click here
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