3 days ago
- Business
- Wall Street Journal
Small Stocks May Be Too Cheap to Pass Up
Little companies are supposed to earn higher returns over time than big ones, but that hasn't been the case for more than a decade. Since the beginning of 2014, the S&P 500 has grown at an average of 13.2% annually, while the Russell 2000 index of small stocks has gained just 7.2%.
Much of that underperformance comes from underexposure to this market's hottest sector. Technology firms constitute nearly 34% of the total capitalization of the S&P 500, versus less than 13% of total value in the Russell 2000. Big stocks have all the momentum of the artificial-intelligence boom. But what if AI turns out to be a bust, it fails to meet expectations or the biggest stocks end up stagnating? History suggests that if the market's biggest companies do stumble, the little guys might do reasonably well. 🔎 Read more:
