how to invest in small cap stocks
if you have the time and the knowledge necessary to research individual small cap stocks you can invest in individual companies their stock can be purchased through a brokerage account before investing in a company you ll want to investigate its if researching individual small cap stocks is too time consuming or seems too risky you can also buy small cap mutual funds or exchange traded funds etfs these might track broad small cap indexes specific industries within the small cap market or investment goals like value or growth small cap stock indexesmany brokerages offer small cap stock index funds either as mutual funds or as etfs to track the u s small cap market depending on the brokerage you use you could for example invest in the vanguard small cap index fund vsmx or the fidelity small cap index fund fssnx however there are two main small cap indexes that are used as benchmarks for the small cap equities market the russell 2000 is a small cap stock market index composed of the 2 000 smallest companies in the russell 3000 the index is frequently used as a benchmark for measuring the performance of small cap stock mutual funds it is managed by london s ftse russell group because it tracks such a broad share of the small cap market the russell 2000 is used by many mutual funds and etfs it is heavily weighted by financials industrials and healthcare 5the s p smallcap 600 index was established by standard poor s the creator of the s p 500 it uses a capitalization weighted index to broadly track the performance of small cap stocks on the u s equities market it includes 600 companies and represents close to 3 of the u s market unlike many other small cap benchmarks the s p 600 has an earnings requirement which is used to ensure the quality of the stocks included and hedge against volatility to be included a company must have a market capitalization between 1 billion and 6 7 billion 6it must also 