Small-cap stocks are shares of companies with a relatively small market capitalization, typically defined as those with a market value between $300 million and $2 billion. These companies are often in the early stages of growth and may offer significant potential for expansion. Investors are attracted to small-cap stocks for their ability to provide higher returns compared to larger, more established companies. However, investing in small-cap stocks also comes with higher risks. These companies can be more volatile and less stable than larger firms, making their stock prices more susceptible to market fluctuations. Additionally, small-cap stocks may have less liquidity, meaning they can be harder to buy or sell quickly without affecting the stock price.