Welcome to Money for the rest of us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it.

I'm your host David Stein. Today is episode 476. It's titled,

Is Small Cap Dead? Why You Shouldn't Abandon Small Company's Stocks.

Just over two years ago in January 2022 we released episode 370 should you invest in

small cap and mid cap stocks. Small cap and mid cap the cap cap, stands for capitalization, which measures the size of a publicly traded company.

Capitalization is measured by the number of stock shares outstanding times the price.

Small cap stocks are typically those that have a market capitalization

between 300 million and 2 billion, although can vary some take that upper range a little higher for

example one of the studies that will refer to in this episode took it all the way up to

four billion which some would say is a mid-cap.

Mid-cap is typically between 2 billion and 10 billion and then large-cap stocks

would be above 10 billion but there are are no set rules. These are just broad ranges.

Now it turns out January 2022 wasn't a great time to increase one's allocation to small cap. Global and U.S. small cap stocks

lagged global and U.S. large cap stocks by about 3% annualized over the past two years.

The one exception though is emerging markets, small cap stocks actually outperformed

emerging markets.

Emerging markets small cap returned 3.4% annualized from the end of January 2022 through March 2024,

while the overall emerging markets declined negative 4% annualized.

As an institutional investment advisor, I began that in the mid-90s,

we would have these university clients we would do an asset

allocation study using modern portfolio theory and invariably we would

recommend allocating 15 to 20% of the publicly traded stock

...