Small-caps historically outperform large caps due to growth potential and margin expansion. The Magnificent 7 have attracted capital flows to large companies, leaving smaller ones forgotten. Small-caps are not cheaper due to structural problems, but rather due to lack of investor interest, making them a potential opportunity.
Small-caps can make amplified moves toward the upside, but they can also burn short-term traders on the downside. This is why it pays to be strategic in volatile times like now with leveraged and inverse exchange-traded funds.
Small caps may outperform large caps in the next bull trade, making the Direxion Daily Small Cap Bull 3X Shares ETF a potential option for exposure. TNA achieves 3x daily leverage through swaps, but its performance is highly influenced by volatility. TNA is a trading vehicle with the potential for big returns, but it comes with higher risk due to small-cap exposure and leverage.
This strategy incurs less risk than owning the stock outright, but has the potential to deliver returns far in excess of simply owning the stock.