Small-cap stocks have historically outperformed large-cap stocks but have also been more volatile and riskier investments. One assumption is that small-cap stocks have great growth potential. Some of the larger well-known stocks were once small-cap stocks. The small amount of capitalization leaves them a lot of room to grow. Bigger companies cannot grow at the same rate percentage rate because they would become too huge to sustain, for example, if Amazon quadrupled in size. On other hand, a small-cap company can quadruple its size and still have room to grow. Small-cap stocks may be penny stocks, but they often have prices much higher. Penny stocks may have a large or small capitalization.
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