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Buy Small Cap at the Stock Market Bottom

Posted June 16, 2008

“Since 1979, according to Ned Davis Research Inc., the small-stock Russell 2000 index has returned 19.6 percent in the first three months after a market bottom, against 13.6 percent for the large-cap Russell 1000.” — Andrew Gordon

by Andrew Gordon

Baltimore – (TFN): Sooner or later, the stock market is going to hit bottom. And when it does, you’ll want to be invested in small caps (companies with capitalizations of around $3.8 billion or less).

Since 1979, according to Ned Davis Research Inc., the small-stock Russell 2000 index has returned 19.6 percent in the first three months after a market bottom, against 13.6 percent for the large cap Russell 1000.

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The superior performance of small caps can last a lot longer than three months, too. When the last bear market ended in 2002, small companies dominated for three years.

Why do small cap companies rebound better than bigger companies? Read on to learn the answer.

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Posted by Andrew Gordon · Filed Under Investment Strategies 

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