You can try to get the exposure to small cap in a growth-oriented mutual fund but there are not that many out there and you can’t always get the proportions that you are looking for. In some cases the mutual funds don’t perform as well since they are invested in so many small caps. Imagine if a small cap mutual fund is holding a number of different companies. If one of the companies they hold performs really well that’s great. Suppose they have the next Microsoft in their lineup. If you have a number of others in there as well that are failing then the overall performance of the fund ends up being neutralized. If you have a feeling that a particular industry is going to take off, a fund geared towards that industry might work for you if you can find it.

Timing means a lot. In troubled times as we have seen lately, investors have a tendency to move away from riskier investments and for the ones that prefer to be in the stock market this will be seen as a move away from small caps. As most stocks see their share price go down in a bear market, so do the small caps. Sometimes this is even truer because of the number of people moving out of that market segment. This can mean that there are some real bargains. It can also mean that there are companies in trouble. Now is the time to act, but it is also the time to act prudently. The right moves could mean big success. The wrong ones could spell disaster. When you move in a different direction from the market you tend to magnify your gain or loss in comparison.

Something you should watch out for as well is ending up with the wrong asset allocation. While it is true that small cap have outperformed large cap over the long run, there is a risk reward balance in the marketplace that holds true with amazing regularity. If you have done well with the small caps as is so often the case when emerging from a bear market, you might unknowingly find yourself overexposed to the small cap market. Keep track of what percentage of your portfolio is invested here to avoid having too much risk. The shorter the timeline for you to withdraw your funds the less exposure you should have to small cap stocks. Do this and you will be in the best position to be successful.