What Are the Risks of Investing in Small Cap Stocks?ДЄny type of investing involves risk, but putting money only into small cap stocks can expose you to the potentially high failure rate of young, growing companies. Greater likelihood of failure than more established companies Here are some of the most general differences between the companies behind small and large cap stocks: Small Cap StocksДЄ balanced portfolio benefits from the unique upsides of both small and large cap stocks, while at the same time diminishing the risks and downsides that might come from investing in all of one or the other. вЂњBy buying into a diversified fund, you gain exposure to the upside without having to choose the specific companies, which involves a lot of research and a lot of risk to your capital,вЂќ said Ron Guay, a certified financial planner with Rivermark Wealth Management. Experts like to diversify their portfolios with a mix of large cap stocks, mid cap stocks and small cap stocks. Experts love index funds because theyвЂ™re easy to manage but be sure to keep an eye on your investments as theyвЂ™re growing. Index funds have low expense ratios or fees -В one of the big reasons they are so popular among experts and investors alike. You can buy index funds through a taxable brokerage account or through tax-advantaged retirement accounts like a 401(k) or a Traditional or Roth IRA. While itвЂ™s possible to invest in small cap stocks by buying shares in individual companies, a much better way for most investors is to add them to your portfolio through an index fund. For investors, a mix of small, mid, and large cap stocks offers a way to benefit from what they all have to offer -В while minimizing the risks that come with a portfolio that lacks diversity.

While larger companies may have less room for big growth in value, they come with a track record that tends to indicate a more enduring value. Large cap stocks are companies like Apple, Amazon, Facebook, Walmart and Mastercard, just to name a few. Large cap stocks represent a majority of the total U.S. Mid cap stocks are in the middle with market caps of $2 billion to $10 billion. Large cap stocks have a market capitalization of $10 billion and up. On the other hand, there are large cap stocks. But before you jump in, do your research and consider buying a small cap index fund. Small cap stocks can be a highly rewarding piece of your investment portfolio.

Small micro cap stocks