UK Smaller Companies funds invest wholly or mainly in the smaller stocks dealt in the UK. The definition of what constitutes “small” varies from fund to fund. It is worth remembering that just because a stock is dealt in the UK, it does not mean that it derives all or even most of its revenue and profits from the UK. Generally smaller stocks are considered to be more risky than larger stocks, possibly because their product and customer bases are less well diversified and they can find it harder to get finance but a smaller companies enthusiast would tell you that smaller companies are more dynamic and have greater growth potential than larger ones.
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