Investing in U.S. small companies stocks is another asset class that goes along with a diversified portfolio. We will look at the essential characteristics of small company stock.
- Investment objectives are growth and diversification
- High to low liquidity depending much on the volume of stock trades
- Expect high levels of fluctuation in pricipal and return because smaller companies tend to go under more than really big ones.
- Capital gains and dividends taxed in year you received.
- More volatile and risky than large cap stocks. Huge price changes can occur very quickly.