In just the last 10 years alone, these stocks have generated 14-20 per cent CAGR returns. Welcome to the world of investing. If you spotted these giants 20-30 years ago, your gains would have been manifold.
In small-cap investing, investors choose small-sized companies with the potential to become tomorrow's mid-caps and large-caps, thus giving you attractive long-term growth opportunities. A portfolio approach is required to taste success in small-cap investing given that these stocks are of smaller companies which carry more risk and thus are more volatile than mid-cap and large-cap stocks.
Why Small-Caps?
Small is beautiful but often overlooked in nature and otherwise. Even though small-cap companies have potentially successful business models, huge growth potential and unique innovative products and services, their small size means investors would rather look at bigger peers. Therein lies the opportunity to experience alpha (higher than benchmark return) for small-cap investing as such stocks are usually under-owned (public shareholding is lower versus mid-caps and large-caps) and also under-researched (400 stocks have no analyst coverage). Unfortunately, direct investing in small-caps has its own set of risks.
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