Have small companies lost their edge?

SPONSORED CONTENT – The tectonic plates beneath the modern investing landscape appear to have started moving in new directions

Countless studies have shown that over the many decades following World War II, there have been two essential building blocks to building wealth over the long term. The first is that shares, otherwise known as equities, have greatly outperformed bonds (albeit that has become a little less clear cut in recent decades). The second lesson is that within those equity markets, it has been a case of “the smaller the better”.

In simple terms, although companies with a smaller market capitalisation (market cap – the number of shares outstanding multiplied by the share price) are much riskier, the long-term returns from holding these stocks greatly outweigh those risks, producing returns far superior to holding government bonds, or even leviathan-scale businesses with a very large market cap.

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MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.