Mutual funds that invest in smaller companies may at times do better than index funds which specialize in similar, so-called smaller cap stocks. At times they have not done badly, when trying to outperform the indexes of larger companies.
But few managers can truly evaluate smaller companies, even less than they can evaluate larger operations. Smaller companies are more erratic and their corporate fortunes are more difficult to anticipate.
Smaller companies may do better for shorter periods but are more susceptible to business hazards and cycles. ( See the Earl J. Weinreb NewsHole® comments.)
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