As you may have read or noticed on your end of year statements, small cap stocks were the top performing category for 2010. These stocks outperformed their large cap counterparts and gave investors with small cap positions a significant boost to their portfolios. All this excitement may have you thinking that now is a good time to reallocate and either add a small cap fund or increase your exposure. Before making a change, consider that small cap stocks can be very volatile and the risks associated with investment are often much less transparent than with larger publicly traded companies. This is why we diligently research mutual fund managers and entrust them with individual stock selection. This blog post from the manager of Templeton Emerging Markets highlights the experience and expertise required to successfully invest in small cap stocks.
Allison Berger is a Certified Financial Planner™. She is an active member of NAPFA, the Financial Planning Association and FPA's Nexgen, and she has been quoted in Investment News.