Two strategists from Royce Investment Partners believe that now is the right time to consider small-cap stocks. In an article on Wealthmanagement.com, Francis Gannon and Steve Lipper gave six reasons why they believe the current environment is a great time to invest in small-cap stocks. The first reason is that small caps currently have superior valuations compared to large-cap stocks. Another reason to invest in small caps is the fact that small caps have a history of outperformance following periods of high investor anxiety and low-risk tolerance. Small caps have also historically beaten large caps following periods of deep declines. In addition, small caps operate in their own way; meaning there are significant differences between small and large caps in their long-term performance during different market cycles. Gannon and Lipper also mention that small caps are a highly heterogeneous asset class, indicating that there are so many small-cap companies that investors can find stocks in every sector and industry. The sixth and final reason is that investors lose out by waiting to put capital to work. They noted that small-cap recoveries have historically happened very quickly.
Finsum:Two strategists from Royce Investment Partners provide six compelling reasons why investors should consider small-cap stocks now.