Technically, small caps are companies with $250 million to $1 billion in capitalization. But we view them as the companies most likely to change the world and, in the process, deliver the prudent investor substantial returns in the long term.

Because of their entrepreneurial nature, smaller companies are often independent of the overall economy and whether it's up or down. This is why they can be such a great diversification vehicle. And despite their reputation for volatility, history shows us that small caps simply perform. Small caps don't do as well in recessions, but they tend to lead us out of them, and usually those periods of outperformance—the years after deep recessions—are among the longest and the best. (Witness the 1930s and the period from 1975 to 1982.)