This article is part of Morningstar's Guide to Passive Investing special report.
For many investors, a big part of the rationale for including small- and mid-cap stocks in a portfolio is their higher return potential. In contrast to their larger-cap, more-mature peers, smaller-cap companies are often more nimble and have greater growth opportunities ahead of them, which can equate to higher long-term returns. But they often have a higher risk profile as well: Their revenue and cash flows are often less consistent and their stock price can be volatile.
Karen Wallace does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.