When it comes to small- and mid-cap stocks, most investors look at them as capital gains components for their portfolios—and there are plenty of good reasons to think that way. Both Russell 2000 and S&P 400 indexes, and their respective uber-popular ETFs (the iShares Russell 2000 Liquid error: internal and SPDR S&P Midcap 400 Liquid error: internal), have managed to trounce the large-cap S&P 500 over the longer haul—and by a lot.
However, those hefty gains come with a hefty dose of volatility: Both small- and mid-caps do bounce around quite a bit more than their larger twins. As a result, most income seekers and those investors either nearing or in retirement tend to avoid smaller firms, which could be a huge mistake.
Looking past their growth monikers, many small- and mid-cap stocks are wonderful dividend payers as well. And while headline yields aren’t as high, these smaller stocks do feature faster rates of dividend growth.
At the end of the day, the time for investors to look towards small- and mid-caps as income plays is now.
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