There’s a lot to like about Small CompaniesI’m a small company guy. I like to work at a place where I have the flexibility to get my work done and go home. I enjoy the Cherry Tree company bake-off, complete with prizes and a trophy. I have fond memories of the holiday party spent curling and summer outings at baseball games. I also enjoy the flexibility to start new initiatives without going through a giant bureaucratic process. This blog is a perfect example of that. I came up with the idea and within a few weeks it was on our website.
My love for small companies isn’t just about my job though. I also like investing in small companies. That’s one of the hallmarks of our investment strategy. Small company stocks tend to earn more than large company stocks. Small companies have certain advantages. It’s easier for them to grow at a fast rate. They are nimbler and more adaptive.
It doesn’t work every year, but small companies have collectively outperformed large companies over time all around the world. With that in mind, our clients own more small company stocks than the average investor. Owning small company stock funds also benefits investors because they don’t move in lock-step with large company stock funds. That helps smooth out your returns.
I’m not too concerned about an all-out trade war yet, but small company stocks are well positioned for that too. Small companies tend to do more local (domestic) business than large companies. That’s not to say they are immune from trade issues, but it could help on the margin.
One word of caution about small companies. Individual small companies are risky, just as any individual company is. So stay diversified!
Questions? Comments? Snide remarks?