Even if you get a charge out of individual companies, bear in mind that spreading your risk is important. By definition, they're industry leaders, with a worldwide marketing reach. Yet we also know that smaller companies, under the right circumstances, can grow faster than big ones. In the second half of the 1990s, the large household names had the edge on earnings growth. But that era seems to be drawing to a close.
Small stocks do carry certain risks.
The stocks are also harder to trade. Lower trading volume widens the spread between buying and selling prices. With some small stocks, a handful of trades can spike the price up or down. For all these reasons, mutual funds are an ideal vehicle for investing in small stocks. Barely noticed by the media, small-cap value funds have put on a stellar performance in 2000.