Small-caps are less-followed, more volatile, and historically have delivered a modest long-term return premium (the 'size factor') though periods vary widely.
Small-cap exposure is easiest through diversified index funds (e.g. Russell 2000 or Vanguard's Small-Cap ETF). Individual small-caps carry heavy company-specific risk.
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Open Decision Lab →Frequently asked questions
Are small-caps riskier?
More volatile, yes. Diversification via a broad small-cap index materially reduces the risk of any one company failing.
Related terms
Market capitalization
Share price multiplied by the number of shares outstanding.
Index fund
A fund that mirrors an index rather than trying to beat it.
Diversification
Spreading investments across many assets so one bad outcome doesn't sink the portfolio.
Large-cap
Companies with market capitalisation of $10B or more in the US.