“Small-Caps: The New Big Opportunity as Indexes Test Over-Bought Levels

In today’s uncertain economic environment, investors should consider adding small caps to their portfolios. Despite the S&P 500 and the NASDAQ testing overbought conditions, small caps have proven to be resilient and are offering stable returns for investors. Small cap stocks are those with market capitalization of between $300 million and $2 billion. These stocks are often overlooked by institutional investors because of their low liquidity. This is what makes them attractive to individual investors — their low liquidity allows them to be bought and sold at reduced prices. Small cap stocks are often more stable than their larger counterparts. During times of economic downturn, large cap stocks are often hit hardest, while small caps remain relatively unscathed. This is especially true in the current market, where large caps have been affected by the pandemic and trade tensions. Small cap stocks also tend to outperform their larger counterparts in the long run. Historically, small caps have outperformed large caps on certain occasions, especially when the stock market is volatile. This gives investors the chance to buy into small caps at lower prices, which have the potential to offer large returns in the future. Overall, small caps are an attractive option for investors who want to diversify their portfolio and reduce the risk of large caps. While large caps have been underperforming, small caps have remained resilient and are offering stable returns for investors.