Small cap stocks are part of just about everyone’s portfolio if you invest in mutual funds with small cap investments as part of the mix. If you focus on the S&P 500 you are missing a part of the market. The S&P 500 index is comprised of companies that are large cap, for the most part. This index includes companies that make up 70-80% of the total value of the US market capitalization. As a result, you might not be taking advantage of possible small-cap investments.
Buying a single small cap stock can be much riskier than buying a single large cap stock. If you are interested in small caps, and think their valuation relative to the broad market presents a value opportunity, you might explore small-cap ETFs using the Fidelity.com ETF screener. This can be done in the ETF screener by selecting market cap, US small/micro-cap theme.
One small cap ETF to consider is iShares core S&P Small-Cap ETF (IJR). This ETF is available for purchase commission-free on Fidelity.com. The investment seeks to track the investment results of the S&P SmallCap 600 (the “underlying index”), which measures the performance of the small-capitalization sector of the U.S. equity market. (INDEX .SML).
Know Your Flocks & Herds 