When it comes to finding growth in a portfolio, many investors have long turned to the size factor as a way to enhance returns. Small-caps and their ability to grow faster have historically been top performers, boosting returns and adding additional diversification benefits. But lately, going small hasn’t exactly worked- with the size factor falling short of historical norms. But that doesn’t mean that investors should throw away small-cap stocks.
They should be buying.
Small-caps represent one of the few opportunities within the market to bet on innovation as well as income in one package. It’s here that they can regain their mojo and potentially find their strength once again. More importantly, buying this income and innovation is pretty cheap relative to the broader market. For investors, going small could be a no-brainer today.
