But you should be wary of investing in them now. And if you do give in to temptation, invest just a small part of your portfolio. Before you jump into small-cap funds, however, you should ask yourself a few questions. You don't fight the Fed. But everyone is ignoring it.
Higher rates increase a company's borrowing costs.
That hurts earnings. Also, when rates rise, investors become more interested in bonds and other interest-bearing investments. Precious few other groups are in the small-cap rally. Retailers, for example, are booming - but their stocks aren't. So if you're looking for a quick gain, the move in small-company tech stocks could be dangerously extended already.