Small Caps Offer Big Opportunities

Small cap stocks are often ignored by Wall Street and in the media. They are smaller, less glamorous companies that don't offer as large a payoff as bigger caps out there. But plenty of small caps are making a big name for themselves. Small caps are slang for stocks of companies that generally have a small market capitalization, somewhere between $2 million and $300 million. Market capitalization is the price of the company's stock multiplied by the number of shares outstanding. It's pretty much the value the market places on a company.

While large caps have a reputation for being reliable and safe, small caps are a bit riskier. Investments in small companies are a bigger gamble because they often have narrower markets and limited financial resources than more established, traditional companies. These stocks can also be more difficult to find than more well known ones. But, if you get in on the ground floor, the opportunities for growth are greater, especially if institutional investors later hop on the share buying band wagon.

For example, Wal-Mart started as a small cap stocks before becoming the world's retail giant with operations on the same scale as Denmark's economy. Small caps have the potential to make or break an investor's portfolio. For Wal-Mart to now double its size s a large cap stock would take much longer than it did as a small cap.

If you are looking to invest in sustainable small caps, firms like Calvert Investments offer a range of SRI services and strategies. Calvert understands that investors want to be informed about investments that meet both their financial and sustainability goals. To cater to many types of investors, Calvert has various approaches to sustainable and responsible investing. The goal of Calvert's New Vision Small Cap Fund, with over $76 million assets under management, is providing long-term capital appreciation through investment in U.S. small caps that meet the Fund's investment and social criteria. Calvert has proven that responsible management of environmental, social and governance factors improves financial performance and increases shareholder value.

Want to do some research of your own? Sustainability Indices like the Domini 400 Social Index, an index made up of stocks of 400 companies selected using social and environmental criteria. The Index includes large and small cap companies with positive records in community involvement, the environment, employee relations and hiring practices. It avoids those with significant revenues from alcohol, tobacco, gambling, nuclear power and weapons contracting. The Domini Social Equity Fund (DSEFX) which follows the Index outperformed the S&P 500 by over 21%, gaining a return of 22% last year. Of course, all stocks risk losses, and it's up to financial advisors and investors to do their homework.