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How to invest in 2021: Look past the Dow and buy small

April 7, 2021. Summarized by summa-bot.

Compression ratio: 18.8%. 1 min read.

Mandatory Credit: Photo by John Angelillo/UPI/Shutterstock (11845237a) Pedestrians walk by the New York Stock Exchange before the opening bell at the NYSE on Wall Street in New York City on Monday, April 5, 2021. The Dow jumped more than 300 points to start the day. Opening Bell at the NYSE, New York, USA - 05 Apr 2021

The stock market is firmly back in bull mode. The S&P 500 is above 4,000 and near a record high, and the Dow is close to an all-time peak, too. But investors should keep smaller American companies in mind, even as they keep throwing money at blue chips like Caterpillar, Chevron and GM.

The Russell 2000 (RUT), an index that's home to many small cap US stocks, is up about 13% so far in 2021.

Investors in smaller companies are also flocking more to value-oriented sectors such as banks, energy and consumer firms, as opposed to growth sectors like tech and biotech -- a trend that's taking place with larger stocks as well.

The rally in small caps comes as many individual investors are gravitating toward riskier (and in some cases, unprofitable) smaller companies.

And, surprisingly, the video game retailer is still in the Russell 2000 -- even though it now has a market value of nearly $13 billion -- more than three times the average market cap of $3. 8 billion for companies in the index.

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