Are small-cap stocks a good investment now?

Small-cap stocks have struggled relative to large-cap stocks in the AI era, but they could benefit from falling interest rates. They are also cheaper than large-cap stocks. The market is volatile at the moment, but under the right circumstances, small caps could outperform.

Does Warren Buffett invest in small caps?

Generally, Warren Buffett only invests in large-cap stocks. That's not because he doesn't want to invest in them, but because Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) is too big for small-cap stocks to move the needle.

How much should I invest in a small-cap?

Small caps tend to be riskier than large-cap stocks, so you may want to be more cautious with them. Dollar-cost averaging is always a good idea, and keeping initial investments in any stock below 10% of its portfolio is a good rule of thumb as well.

How much of my portfolio should be in small-cap stocks?

There's no definitive rule on how much of your portfolio should be invested in small-cap stocks, but if you're looking for some exposure to small caps, 10% is fair if you want a balanced portfolio.

Should beginners invest in small-cap stocks?

Yes, beginners can and should invest in small-cap stocks. Though they may be riskier than large caps, they also have more upside potential.

What are the historical returns of small-cap stocks?

Over the last ten years, the Russell 2000 small-cap index has averaged an annual return of 8%. In most timeframes up to today, the Russell 2000 has underperformed the S&P 500, which has surged from the AI boom.

Are small-cap stocks riskier than large-cap stocks?

Yes, small-cap stocks are generally more volatile and riskier than large-cap stocks. Small caps are less likely to be profitable and more sensitive to the broader macro-level economy.

Best Small-Cap Stocks to Buy in 2026: Are They Right for Your Portfolio?

By Jeremy Bowman – Updated Mar 11, 2026 at 1:38 AM EST | Fact-checked by Frank Bass

Key Points

Small-cap stocks, valued between $300M-$2B, offer potential high growth but carry higher risks and volatility.
Investing in small-caps requires a long-term mindset due to their significant price fluctuations and potential rewards.
Before investing, evaluate small-cap stocks' financial health and market potential to mitigate risks and identify opportunities.

Some of today’s biggest stock market winners started small. Amazon traded for under $10 in the late 1990s. Tesla was once valued at just over $1 billion.

Small-cap stocks can be where tomorrow’s leaders are born.

But for every breakout success story, there are plenty of small companies that struggle or fail. Small caps can deliver impressive growth, but they also come with higher risk and sharper price swings.

Understanding how small-cap stocks work and whether they fit your goals is key before investing.

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Ticker Information Table
Name and ticker	Market cap	Dividend yield	Industry
Magnite (NASDAQ:MGNI)	$1.9 billion	0.00%	Media
Amplitude (NASDAQ:AMPL)	$1.0 billion	0.00%	Software
Consolidated Water (NASDAQ:CWCO)	$549.6 million	1.54%	Water Utilities
Sweetgreen (NYSE:SG)	$674.7 million	0.00%	Hotels, Restaurants and Leisure
Serve Robotics (NASDAQ:SERV)	$720.3 million	0.00%	Hotels, Restaurants and Leisure

Data as of Mar 11, 2026. Showing 5 of 5 tickers.

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1. Magnite

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NASDAQ: MGNI

Magnite

Today's Change

(-3.99%) $-0.54

Current Price

$12.99

Key Data Points

Market Cap

$1.9B

Day's Range

$12.96 - $13.56

52wk Range

$8.22 - $26.65

Volume

52K

Avg Vol

2.4M

Gross Margin

62.08%

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Magnite (MGNI -3.92%) is a supply-side digital advertising platform formed by several mergers and acquisitions. The company has established itself as a leader in video and connected TV (CTV) advertising, or ad-driven streaming, catering to online publishers and streaming platforms like Walt Disney (DIS -0.35%), Fox (FOX -1.78%), and Warner Bros. Discovery (WBD +0.04%).

Magnite partners with The Trade Desk (TTD -3.19%) and other adtech companies to manage publisher inventory efficiently and keep its technology up to date. In one positive sign, the company announced in mid-2025 that the FanDuel Sports Network has seen a 25% year-over-year increase in its total impressions, thanks to Magnite.

The ad tech company could also benefit from the recent ruling finding Google to have a monopoly in adtech. While its growth has moderated since the COVID-19 pandemic boom, Magnite still has a lot of potential growth ahead of it and remains the CTV leader for supply-side adtech.

2. Amplitude

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NASDAQ: AMPL

Amplitude

Today's Change

(-1.41%) $-0.11

Current Price

$7.69

Key Data Points

Market Cap

$1.0B

Day's Range

$7.41 - $7.78

52wk Range

$6.00 - $14.49

Volume

68K

Avg Vol

1.9M

Gross Margin

73.87%

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Amplitude (AMPL -1.41%) is a leader in digital product analytics. The company's software allows businesses to see how customers interact with their apps and websites so they can make improvements and learn what works and what doesn't.

For example, Amplitude helped guide Burger King's "Whopper Detour" campaign. It also showed Peloton (PTON -3.89%) how social engagement was key to getting its customers to stick with its workouts.

Like other software stocks, Amplitude struggled in the aftermath of the COVID-19 pandemic as many of its customers restructured their contracts. But the company has moved past that churn. It's seeing improving growth, especially in remaining performance obligations, a proxy for backlog.

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Amplitude also launched a new suite of AI agents in June 2025, which has since accelerated its growth and been well received by customers. Those included a website conversion agent, an onboarding agent, and a monetization agent. The company has built out its product suite and looks poised to grab market share from Alphabet's (GOOG +0.30%)(GOOGL +0.25%) Google Analytics and Adobe (ADBE -2.59%) Analytics, the category leaders. If Amplitude can fulfill its promise, the stock could move a lot higher from here.

It's also made a number of acquisitions to boost its position in AI, including acquiring Kraftful, an AI-focused, user feedback start-up, in July.

3. Consolidated Water

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NASDAQ: CWCO

Consolidated Water

Today's Change

(-2.97%) $-1.05

Current Price

$34.50

Key Data Points

Market Cap

$550M

Day's Range

$34.09 - $35.30

52wk Range

$22.69 - $39.12

Volume

214K

Avg Vol

79K

Gross Margin

35.27%

Dividend Yield

1.54%

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Utilities come in all shapes and sizes, so it shouldn't be surprising to find a water utility on this list. Consolidated Water (CWCO -3.19%) specializes in desalination, which could become a big trend in the coming years as water supplies around the world are stretched and more coastal and tropical communities turn to desalination.

The company is currently focused on the Caribbean market, with several plants in the Cayman Islands and the Bahamas. That's helped it deliver strong growth in recent years, outperforming its water utility peers. The trend should continue as it capitalizes on the desalination opportunity and water scarcity becomes a greater problem.

In June, the company raised its quarterly dividend 27% to $0.14, a sign of confidence in its future growth.

4. Sweetgreen

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NYSE: SG

Sweetgreen

Today's Change

(-4.67%) $-0.28

Current Price

$5.72

Key Data Points

Market Cap

$675M

Day's Range

$5.71 - $6.11

52wk Range

$5.00 - $27.15

Volume

131K

Avg Vol

4.5M

Gross Margin

4.71%

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Sweetgreen (SG -5.00%) is the leading fast-casual salad chain and has a ton of growth potential, considering it had only about 280 locations at the end of 2025.

While the company has yet to deliver significant profits on the bottom line, Sweetgreen has a high average unit volume, or average sales per unit, of $2.8 million, on par with industry leaders like Chipotle (CMG -1.70%).

The company is also investing in an automated system it calls the Infinite Kitchen, a robotic assistant that helps put together orders faster, increasing throughput and saving on labor costs. Infinite Kitchen also helps differentiate the company from other restaurant operators.

Sweetgreen is expanding its base with plans to add 15-20 new restaurants in 2026. The company has significant growth potential over the long term, as it is aiming to reach at least 1,000 restaurants.

The company has struggled in 2025 due in part to weak demand from a key customer demographic, 25- to 35-year-olds. The slump has affected other fast-casual chains, but the company should get back on track over the long term.

5. Serve Robotics

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NASDAQ: SERV

Serve Robotics

Today's Change

(1.63%) $0.15

Current Price

$9.64

Key Data Points

Market Cap

$720M

Day's Range

$9.57 - $9.89

52wk Range

$4.66 - $18.64

Volume

24K

Avg Vol

5.8M

Gross Margin

-48127.88%

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One potentially disruptive small-cap stock worth following is Serve Robotics (SERV +1.90%), a maker of food delivery robots. Serve is still a development-stage company with a revenue run rate of less than $3 million as of the third quarter of 2025.

The company was spun off from Uber (UBER -1.95%) in 2021 and still counts it as a major investor. Its delivery robots collaborate with the Uber Eats platform, delivering restaurant orders from chains like Shake Shack (SHAK -0.28%), and it recently signed a deal with DoorDash.

Though Serve Robotics is still a small company, it's growing rapidly. Revenue nearly tripled in the third quarter of 2025, and it still has a long runway to expand as it recently launched its service in Chicago, its first market in the Midwest. While Serve Robotics is a high-risk stock, it's the kind of business with upside potential that makes small-cap stocks attractive.

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FAQ: Small-cap stocks

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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Jeremy Bowman has positions in Chipotle Mexican Grill, Magnite, Sweetgreen, The Trade Desk, and Walt Disney. The Motley Fool has positions in and recommends Adobe, Alphabet, Chipotle Mexican Grill, Peloton Interactive, Serve Robotics, The Trade Desk, Uber Technologies, Walt Disney, and Warner Bros. Discovery. The Motley Fool recommends Magnite and Sweetgreen and recommends the following options: long January 2028 $330 calls on Adobe, short January 2028 $340 calls on Adobe, and short March 2026 $42.50 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.