In chaotic markets — like we're living through today — many investors get spooked and fall back on the largest, most successful companies.
Big mistake.
The truth is, the bigger a company, the farther it has to fall.
Take a look at Facebook — which just had the biggest one-day drop in stock market history.
Meanwhile — according to Morningstar — small cap stocks outperformed every other type of investment last year.
Just as they have ever since the current market turmoil began.
When you think about it, it makes sense.
After all — chaotic markets are often driven by changing conditions.
And, in changing conditions, old-fashioned businesses often get swept away by new market forces.
It was in chaotic markets that horse-and-buggy companies were passed by auto manufacturers, over a century ago.
Oil and energy companies used to have the largest market caps — until the chaotic markets a decade ago saw tech companies emerge as the most valuable businesses in the world.
And in today's chaotic marketplace, the biggest gains will come from some currently-small companies that pass by older, larger businesses still stuck in a pre-pandemic world.
The trick is figuring out which small caps will be tomorrow's winners.
