Last Updated on 9 January 2021 by F.R.Costa
While small caps may seem riskier, they tend to outperform in the longer-term. Investor just need to diversify. Article originally published at Master Investor Magazine June 2019 Issue 51 p. 38-45.
Smaller capitalisation stocks appear riskier if we look at standard deviation and beta measures, usually built from daily or monthly returns. But when we calculate risk as a measure of failure to attain objectives over longer time periods, we observe that smaller caps may be a lot less risky than first thought
There are a few different ways of getting exposure to small caps. The easiest and cheaper is eventually through an ETF. I review a few on the article. But, for the bravest, there is also the possibility of hand picking shares. While being a lot riskier, if the right filters are applied, the resulting portfolio may be better positioned to capture the size factor than an ETF. For more about this, you can take at the original article at the Master Investor Magazine.