The Foolish Approach to Small-Cap Stock Investing

by Wayne A. Thorp

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They won’t be obvious. When looking for the top-performing stocks of the next five or 10 years, you shouldn’t look at the Microsofts or Wal-Marts of the stock universe.

Instead, you need to look at stocks that have yet to cross the radar of most investors: mainly small-cap stocks. Unfortunately, for every small-cap to large-cap success story, there are many others that fail to survive. As a result, many individual investors deem small-cap stocks too risky for their portfolios.

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But there is an important reason not to ignore this market segment: Small-cap stocks do not garner much attention from analysts or institutional investors. As a result, they provide a unique opportunity for individual investors to venture into an area of the market that is neglected by larger investors.

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