Small Companies: The Undiscovered Investment Opportunity

Investors often focus on well-known companies, but they might be missing out on a big chance. Small companies, which are often overlooked, could be a smart investment right now. They don't usually offer big dividends. On average, they provide around 1. 1%. However, while large tech companies like Apple and Microsoft have seen huge growth, small-cap stocks have lagged behind. This could mean they are undervalued and poised for a comeback. One standout in the small-cap world is the Royce Small-Cap Trust. This closed-end fund (CEF) focuses on small companies with strong cash flow growth. It has outperformed the small-cap index by a significant margin. Here's an interesting twist: while the average small-cap ETF pays out 1. 1% in dividends, the Royce Small-Cap Trust offers a substantial 7. 2%. CEFs like Royce distribute as much of their profits as possible as dividends. This makes them an attractive choice for investors seeking steady income, especially in volatile markets. Currently, the Royce Small-Cap Trust is trading at a discount to its net asset value (NAV). This means the fund's share price is lower than the value of its assets. This could be a great opportunity. The market might eventually correct this mispricing, leading to potential gains. Investing in small caps comes with risks. But combining the Royce Small-Cap Trust with other investments can help smooth out the ups and downs. For example, investors can use the income from the Royce Small-Cap Trust to buy other funds when they are on sale, and vice versa. This strategy can help secure a steady income stream and position investors for gains without putting all their eggs in one basket.