Investing in Small cap ETF vs Large cap

**Broken Arrow** · 11-20-2008, 11:29 AM

Where did you see this?

From an investing point of view, your asset allocation should have both large caps and small caps in your portfolio. The percentages are a matter of risk tolerance, investment horizon, and maybe even personal preference.

Even from a trading point of view, the fundamental principles of investing still apply. In this case is Peter Lynch's sage advice, "Buy what you know." Personally, I don't care what cap it is. I'm looking for net upside potential, and how confident I am of it based on what I can gather. Big, small, it doesn't matter, just so long as it goes up!

Or, perhaps you've been reading Motley Fool and stumbled across some articles that suggest small caps are a better investment than large caps because small caps are usually where the undiscovered gems are located, or that they give the most growth potential.

Of course, Motley Fool also have other writers that would argue large caps with dividends are some of the safest, and between dividends and growth, many large cap stocks do manage to out-perform even small caps without the equivalent risk.

Personally, I think both are valid, and yet, both are hog-wash. The truth is, it doesn't matter. Your money will always be at risk no matter where you go.

And the only way to mitigate that risk is to simply, "Buy what you know".

I shouldn't say "simply" because it's easier said than done. Anyways, I'm sorry but I don't have any specific recommendations for you. Most major mutual fund companies should offer a small cap fund of some kind, even ETFs depending on who you are with.

**jIM_Ohio** · 11-24-2008, 10:36 AM

Asset allocation should have large caps and small caps. My take is large caps tend to do well coming out of recessions.

Investing in Small cap ETF vs Large cap