5 Compelling Reasons to Invest in Small-Cap Stocks

Small-cap stocks appeal to some investors because of their potential for strong growth. But are they right for you, right now?

Small-cap stocks are easy investments to understand. The market capitalization of a company is its stock price times the number of shares it has outstanding. While the definition varies, small-cap stocks may include companies with $250 million to $2 billion in market capitalization.

Small-cap companies are agile. Small companies may have greater growth potential than larger companies. Generally speaking, smaller companies are generally more nimble than larger companies, so decisions about new products and services and adjustments when problems arise can be made and implemented quickly.

Small-cap stocks may perform well when markets are down and improving. It is generally thought that small-cap stocks can perform better than larger-cap stocks when markets have been down and are improving.

Small-cap stocks may perform well in rising interest rate environments. Small-cap stocks also tend to perform well in rising interest rate environments. Today, we are not in a rising interest rate environment, but that could change.

The time may be right for small-cap stocks. You probably know, however, that it is wise to avoid trying to time the market; it is generally better to choose an appropriate asset allocation for your risk tolerance and financial goals and stay the course. It’s always a good idea to have diverse investments in your portfolio.

Do you need help investigating small-cap stocks for your portfolio? I’m here for you. Please contact me today, and we can make sure that you aren’t missing anything from your asset allocation.