Small cap stocks are an important part of a long-term investment portfolio. They've had higher returns than large-cap stocks, and have performed well (and poorly) at different times, meaning that they also provide a diversification benefit. During the "lost decade" from 2000 through 2009, while the S&P 500 lost -1.0% per year ($1 declined to $0.91), the DFA US Small Cap Index gained +8.9% per year ($1 grew to $2.34). The benefits of small-cap investing extend overseas as well -- during this same period, the DFA International Small Cap Index gained +8.4% per year ($1 grew to $2.24), and the DFA Emerging Markets Small Cap Index returned +14.1% per year ($1 grew to $3.72).
But there aren't as many small company stocks in the US as there used to be. Is this something that you should be concerned about? What does it mean for the small-cap stock premium? Watch the video below to find out more:
Past performance is not a guarantee of future results. Index and mutual fund performance includes reinvestment of dividends and other earnings but does not reflect the deduction of investment advisory fees or other expenses except where noted. This content is provided for informational purposes and should not to be construed as an offer, solicitation, recommendation or endorsement of any particular security, products, or services.