Investing in smaller companies
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11. Conclusion
- Even when blue chips were thought of as safe investments, it was an observable fact that smaller companies gave a better long term performance. This is as it should be, since greater risk should mean greater rewards.
- Historically, there have been times when it has been profitable to invest in large caps and other times when you would have been better off investing in small caps. It depends on market sentiment, the stage of the stock market cycle, and on fundamentals.
- A note of caution is undoubtedly called for. Yes, you can make a lot of money very quickly by investing in small caps. But if the prices you pay bear no relation to assets or earnings, you have to ask yourself how long they can last. History suggests that when the mood of the market turns, it turns very suddenly and very sharply.
You have now completed the course. To test your knowledge, take the Assessment test.
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