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, CFP® does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.