Although security is an admirable concern in a down market, investors could be doing something better with the $3.5 trillion they've tucked away in money-market funds. You won't get rich earning 1.9%, the recent average money-fund yield. Rather, you'll make the big bucks with bold moves that may appear foolhardy at first. Today, one of those moves appears to be stashing money in micro caps -- the smallest of small companies.

Micro-cap stocks could lead the way out of this down market. Managers who have spent their careers watching these stocks say they haven't seen so many good companies trading so cheaply in decades. Small-company stocks tend to rise first and farthest coming out of a bear market, partially because they often give up more on the way in. In 2003, as the market raced out of bear territory, the S&P 500 gained 29%, but the small-company Russell 2000 tore ahead with a 47% leap.

Solid results. Micro caps carve an erratic path. But long term, the bumps smooth into a historical return of nearly 14% annualized, compared with big com-panies' historical 10% gain.

- Elizabeth Ody, Associate Editor,
Kiplinger.com
Monday, September 8, 2008; 12:00 AM