Small-cap companies typically carry more debt relative to their earnings than large firms. Because of this, their performance is highly sensitive to the cost of borrowing:
Because small-caps are highly volatile and can suffer double-digit losses during downturns (e.g., losing 36% in 2008), timing an entry isn't enough; you must also time your exit. What Is Small Cap Fund - Meaning, Returns and How to Invest when to buy small cap funds
: Historically, small-caps have outperformed large-caps in the months following a Federal Reserve interest rate cut . Small-cap companies typically carry more debt relative to
Market cycles of outperformance for small-caps vs. large-caps last about on average. losing 36% in 2008)
As the economy stabilizes and demand improves, smaller, more agile firms can see revenue and profit grow more sharply than their massive counterparts.