Small Packages For diversity-hungry investors, good things come in small cap stocks.

Everyone knows bigger is better. Bigger houses and bigger carsare signs of bigger paychecks and bigger success. The stock markethas echoed this theme, with the large companies housed in the DowJones Industrial Average and Standard & Poor's 500 (S&P500) racking up, well, really big gains for the past two years.Actor Tom Hanks could tell you that "Big" was good forhim. But as comedian Steve Martin once put it, maybe now's thetime for everyone to get small . . . small-company stocks, thatis.

At first glance, the question seems academic. Why shouldinvestors abandon what seems to be a sure thing to embark on whatcould be a volatile and risky relationship? After all, for the 12months ending April 1997, the total return of the Russell 2000, anindex of small stocks--also known as small caps--lagged behind theS&P 500 by a big 20 percent--the second-worsttrailing-two-month performance in the history of the index. ButClaudia Mott, director of small-company research at New YorkCity-based Prudential Securities Inc., a full-service brokeragefirm, notes that now could be the time to take the plunge."Historically, the average return for the Russell 2000 in thesix-month period following substantial trailing-12-monthunderperformance is well above 20 percent," says Mott."Although many of these periods overlap, there have been onlythree subsequent six-month periods in which the small capsunderperformed the S&P Composite." Yet the questionremains: Should small stocks be a part of your portfolio?

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