But on the downside, the small and mid caps normally incur larger losses. Historically, small and mid caps have recovered at a much faster pace than large caps after large losses. While large caps have performed well, up nearly 190%, small and mid caps have been crushing it, with both up nearly 300% since the bottom. This chart shows the returns of each market from Mauntil mid-November: This has definitely been the case since the bottom of the market in March of 2009. Other studies have shown small and mid cap dominance going back even further. The Wilshire Small and Mid Cap Indexes have outperformed the Wilshire Large Cap Index by around 1.5% per year going back the their inception in 1979. So small and mid cap stocks have outperformed over the long term (they are also considered riskier investments than large caps, but that hasn’t stopped them from outperforming). They don’t pay attention until they start to see solid performance and growth and then they decide to jump in. This allows smaller-sized companies to go much more unnoticed by Wall Street. And almost 30% of small caps have no analyst coverage at all. Consider that, according to Fortune, the average small cap company has only two research analysts, compared with twelve for large cap companies. Small and mid-sized companies don’t get as much attention from the investing community. The financial media focuses on the largest markets and the largest companies within those markets. Most investors focus on the large cap markets such as the S&P 500 and the Dow Jones Industrial Average. With this background he may be in a position to form some worthwhile judgment of the attractiveness or dangers…of the market.” – Benjamin Graham “An investor should have an adequate idea of stock market history, in terms particularly of the major fluctuations. Are Small and Mid Cap Stocks Getting Pricey?
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