4 reasons to invest in small cap stocks

Over the long-term, small cap stocks could deliver higher returns. And now is a good time for investors to consider these companies as valuation is attractive.

16 Sep 2020

Why invest in small cap stocks?

  1. Attractive valuation vs larger cap stocks
  2. Potential for better longer-term returns
  3. Lower research coverage which gives well-resourced teams an information advantage, and opportunities to uncover hidden investment gems
  4. Broader investment set, higher active share, larger chance of outperformance for active managers

The Coronavirus pandemic has had a profound effect on share prices this year, and smaller companies have been no exception. In the first seven months of 2020, the MSCI All Country World Small Cap index (ACWI Small Cap) fell by 8.7%, against the 1.3% drop of the MSCI All Country World Index (ACWI) . Small cap stocks typically deliver higher long-term returns, and we explore why we believe that now is a good time for investors to consider their allocations to small cap.

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