Small-caps give the individual investor a chance to beat the Wise to the punch. The size and structure of most mutual funds and a pesky SEC regulation make it hard for funds to establish meaningful positions in small-caps. Individual investors who have the ability to spot promising companies can get in before the institutions do. When institutions do get in, they'll do so in a big way, buying many shares and pushing up the share price. Another reason to buy small-cap companies is that they can grow quickly.
Small companies are in a much better position than their larger brethren to expand their businesses.
Rapidly multiplying earnings often translate into higher share prices. Novices should steer clear. The money you invest in small-caps should be money you can afford to lose. Finding good small-caps is a lot of work before and after you've made your purchase. If you don't have the time, energy, or inclination to keep up with the news on your portfolio, you're better off in an index fund .