Thursday, 27 October 2022 06:02

Market volatility: small caps, small stuff?

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Due to their difficult to resist growth potential, many investors rock on small cap stocks – less than $1 billion market cap, according to talkmarkets.com.

Thing is, because of their volatility, which translates into factors such as a stepped up risk of bankruptcy, the stocks are surrounded by less than favorable sentiment. While a valid point of view, the perspective, seemingly, is at least a tad overblown. Over the long run, numerous small caps hit pay dirt.

That said, due to sometimes daunting wild swings in pricing, like a bad date, compatibility among  conservative investors and small caps might be zilch. Some apps, y’know…

Meantime, what do factors such as the Ukraine war, escalating oil prices and interest rates sending U.S. equity markets into the blender this year add up to? Why, greater volatility, of course.

And compared to their large cap counterparts, there’s this, well, thing, about U.S. small stocks compared to their large cap counterparts: greater risk, according to oakfunds.com. While it might seem somewhat, well, illogical to propose ratcheting up the allocation of small cap stocks into your portfolio, it might serve as a buffer against these tumultuous times and offset harrowing times that could be linked with large cap stocks. 

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