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Reply to "allocation -- small cap vs large cap"
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[quote=Anonymous]I invest in small cap but not a majority of assets (or even equity assets). You're right that generally small cap outperforms large, but the volatility means that on a risk adjusted basis, the performance differential is not as compelling. Small cap is one of the better places to use active management because it's easier for an active manager to outperform the index due to the inefficiencies of the market, number of companies in the universe, and reduced analyst coverage relative to large cap. Using an index fund won't necessarily dampen volatility because the companies in the index are inherently more volatile due to their market cap.[/quote]
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