As if that wasn’t bad enough itself, add some scared kids into the mix and you’ve got the perfect recipe for a night of terrible sleep.

But as I slogged into the office this morning and began working on the latest investing in small-cap stocks research report for my small-cap healthcare service, Access, a perfectly timed e-mail hit my inbox…

Dear Access Research Team,

I just wanted to let you know that as of today, May 20, barely 5 weeks after becoming a subscriber, my portfolio is up 36% and has surpassed the cost of my subscription. I was very hesitant to plunk down, what was to me, a large chunk of cash for your information but I am glad I did.

I am just a budding investor, having only begun trading seriously this year. I lost money over the last two years trying to learn, but since joining the Oxford Club and Access, I’ve learned valuable strategies that are making me a better investor every day. Thank you for all your efforts and research. Keep up the good work!!!

Most sincerely,

M.R.

Talk about a day-changer! Sometimes, it’s the simplest, most unexpected thing that can pick you right up.

Reading that e-mail reminded me why I turned down several institutional jobs (including an analyst position with one of the oldest investment banks in America) to work for Mt. Vernon Research.

While making rich guys richer is fine, helping subscribers like M.R. become better, richer investors is incredibly rewarding. So allow me to help you do the same today…

Investing in Small-Cap Stocks: Incredible Reward Potential

If you want a shot at incredible rewards, look no further than investing in small-cap stocks – one of my specialized investment areas.

These are companies that Wall Street either tends to ignore, or simply not bother understanding their stories and potential. But their loss is our gain because good small-cap research can exploit that situation.

Then, once Wall Street realizes it’s missed the boat on a stock, it tries to play catch-up by initiating coverage or upgrading it. Institutional buyers then start snapping up shares. These two forces can push a stock sharply higher very quickly.

But for investors who jump in ahead of the crowd, the gains received by investing in small-cap stocks can be stunning.

For example, in Access we’re up:

• 62% on a medical device maker…

• 52% on a misunderstood biotech firm…

• 142% on a bioterror defense company (results as of May 20).

My next report, which should be out in a week or two, is a classic example of a company whose story analysts just don’t get…

This little medical device maker has a best-in-class product that is grabbing increasingly large chunks of market share every year. And what Wall Street doesn’t comprehend is that it can use its reputation and relationships to grab market share in another market that is nearly three times bigger.

Bottom line… I think the stock could easily double from current levels.

Why You Should Invest In Small-Cap Stocks Today

The question is… how do small-cap stocks fit into today’s turbulent market?

It’s no secret that I’m bearish on the overall market.

But even if the broad market heads lower, there are still enormous opportunities in small-caps. Companies with revolutionary products that lower costs for consumers and improve efficiency should do very well even in a tough economy.

And when we do come out of recession, there’s no better area to be than small-caps. That’s because they historically lead the market higher out of difficult times. For example, small-cap stocks…

• Beat large-caps every year between 1974 and 1983.
• Outperformed large-caps for the vast majority of the years between the Great Depression and the end of World War II.
• Trounced large-caps by about 40 percentage points from the top of the market in 2000 to the next top in 2007.

So what are the best ways you can position yourself to take advantage of investing in small-cap stocks?

Investing in Small-Cap Stocks: Four Opportunities To Consider

If you want to head down the ETF route (which give you the ease and flexibility of trading like stocks, typically have lower costs, and allow you to diversify your portfolio through just one investment), you could buy…

• Vanguard Small-Cap ETF (NYSE: VB)

• Vanguard Small-Cap Growth ETF (NYSE: VBK)

You could also choose mutual funds like…

• Vanguard Tax Managed Small-Cap Fund (VTMSX), which has a very low expense ratio

• Vanguard Explorer (VEXPX)

Note that neither Mt. Vernon Research nor I have a relationship with Vanguard. I just think they run good, shareholder friendly funds.

And if you want to drill down even further and profit from individual small-cap stocks, I invite you to take a look at my “Xcelerated Small-Caps” column in the Xcelerated Profits Report (I have a new recommendation in the June issue, due for release tomorrow), or in my small-cap healthcare service Access.

Whatever you decide to do, be sure to include small-cap stocks in your portfolio, particularly right now. Having them in mine, allows me to sleep well at night… weather and children permitting, of course.

Marc Lichtenfeld

Source: Investing In Small-Cap Stocks: Four Investment Opportunities To Consider

This from Investment U:

With the stock market’s historic drop this year, some investors have fled to cash. Others are cautiously buying. Most, however, are sitting on their hands.

They shouldn’t be.

Even if you lack the cash – or the willpower – to buy into this market, there is still a very smart move you can make: switch.

Switch from your poor-performing, high-cost, tax-inefficient stock and bond mutual funds to index funds or exchange-traded funds (ETFs).

It’s a very smart move. Here’s why…

Why Choose Exchange Traded Funds Over Mutual Funds?

Compared to exchange traded funds, most mutual funds are a lousy deal, here’s why:

• Each year more than three-quarters of them fail to match the performance of their benchmarks.
• Many are loaded with front-end or back-end loads, 12b-1 fees, high management costs and other expenses.
• Moreover, even when these actively managed funds fall sharply, they still often distribute annual capital gains to shareholders, in effect handing shareholders a paper loss and a tax bill at the same time.

Don’t stand for it. Now is your chance to fight back.

Switching to Exchange Traded Funds Will Save On Taxes

Switch from your underperforming mutual funds to index funds and exchange-traded funds – and save yourself thousands of dollars in taxes in the process.

The IRS allows you to take losses each year to fully offset any realized capital gains. And also allows you to take capital losses to offset up to $3,000 in earned income.

In a year as nasty as this one, of course, you probably don’t have too many realized capital gains to worry about.

You should make this switch anyway. The IRS allows you to carry forward your losses indefinitely to offset future capital gains.

As bleak as the outlook is today, there will be capital gains in your future and, eventually, the tax on them is going to be higher than it is now.

Aside from the thousands you’ll save in taxes (and expenses) in the years ahead by making this switch to exchange traded funds, there is an important psychological reason to do it.

When you get your statements in 2009 and beyond, instead of looking at a smorgasbord of losing positions you’ll be looking at winners. You may not end up buying at the very bottom – few do – but you will have bought a whole lot closer to it than you did originally.

Exchange Traded Funds – Turning Market Lemons Into Lemonade

So take the lemons the market has handed out so abundantly this year and turn them into lemonade with exchange traded funds. Here’s how:

Sell Your Losing	Replace It With:
Gold Stock Funds	Market Vectors Gold Miners ETF (NYSE: GDX)
U.S. Large-Cap Stock Funds	S&P 500 ETF (AMEX: SPY)
U.S. Small-Cap Stock Funds	Vanguard Small Cap ETF (NYSE: VB)
International Stock Funds	iShares MSCI EAFE (NYSE: EFA)
Corporate Bond Funds	Vanguard Total Bond Mkt ETF (NYSE: BND)
Junk Bond Funds	iShares High Yield ETF (NYSE: HYG)
Inflation-Adjusted Bond Funds	iShares Lehman TIPS (NYSE: TIP)
Emerging Market Stock Funds	iShares Emerging Mkts (NYSE: EEM)

Using Identical Exchange Traded Funds As Smart Tax Moves

If you’re already invested in exchange traded funds, incidentally, you can still make the same smart tax move by selling your losers and moving into virtually identical funds.

For example, you can take a loss in one S&P 500 Index Fund (AMEX: SPY) and replace it with, say, this S&P 500 Index Fund (AMEX: IVV). Even though these funds have the same benchmark and are virtually identical, they are different funds, so the IRS allows the switch.

(For a complete list of ETFs at Fidelity.com.)

However, you cannot sell a fund and buy back the exact same one and qualify for this deduction (unless you wait at least 30 days). If you do, you run afoul of the wash-sale rule.

Incidentally, if you own individual shares that are down but for which there is no logical replacement (think Apple or Berkshire Hathaway) and you don’t want to sell and risk that the stock will be substantially higher 30 days from now – always a possibility from these depressed levels – you can double down on your stocks now, then sell your higher-cost shares the last week of December. (You will, of course, be doubling down on your risk for the next 30 days.)

If you plan to do this, however, you need to do it by the end of the month. Once November ends, it will be too late to do it for the year.

Bear in mind, you cannot take tax losses in an IRA, 401(k) or other qualified retirement plan. But you should still consider making the switch to ETFs and index funds for the cost advantages and psychological benefits I’ve described.

Source: Exchange Traded Funds: An Investment Move You Need to Make…

This from Penny Sleuth:

By now, you’ve probably heard a lot about exchange-traded funds (ETFs). Since their inception in the early 1990s, the financial world has been aflutter with investors hungry for the efficiency and ease of buying ETFs. Want to know how you can cash in on the ETF craze? Here’s a look at exchange-traded funds…

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From seven cents to $9.60 a share… The amazing story of the millionaire-maker stock that turned $500 into $68,571.43…

Very few people knew about this stock, because Wall Street would rather keep stocks like these a secret so the insiders can grab all the profits. But now it’s your turn to cash in…

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If you’re wondering what an ETF is, you’re not alone. ETFs are portfolios that you can buy and sell ownership in. Basically, an ETF is a lot like a mutual fund that trades on an exchange like a regular stock. That’s an important distinction, because unlike open-ended funds, which buy back their own shares, ETF owners can sell their funds to anyone in the stock market who’s willing to buy. That and higher levels of transparency make for an investment that trades much closer to its actual value than a regular mutual fund.

Advantages of ETFs

There are a few reasons why ETFs look good… ETFs offer instant diversification, lower costs, and ease of purchase that you can’t find anywhere else.

As an investor, one of the smartest things you can do with your portfolio is diversify. That’s because a diversified portfolio can make more gains at a lower risk than a single investment. Since ETFs own a bunch of different securities (like stocks and bonds), when you buy an exchange-traded fund your portfolio is instantly diversified.

Besides diversification, one of the biggest reasons to get into an ETF is cost. For starters, ETFs can substantially reduce the transaction costs associated with diversification. Instead of paying commissions for each individual stock you buy to diversify your portfolio, when you buy an ETF, you only pay commissions for the ETF itself. ETFs also have considerably lower expense ratios than mutual funds.

Expense ratios are the management fees funds charge to their investors. With an ETF, expense ratios are generally between 0.1% and 1% — compare that to the 1% to 3% generally charged by mutual funds, and it’s clear that ETFs are the winner here.

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One of the reasons ETFs have been so successful is their accessibility. ETFs trade on stock exchanges, which means that any investor has access to them without minimum investments restrictions. That means that they’re the easiest way to get into a managed fund investment.

Kinds of ETFs Available

Today, new types of ETFs are springing up, giving individual investors more investment options than ever before. Here are some of the main types of ETFs:

Stock Index ETFs: The most common type of ETF today. These funds are designed to track major stock indexes like the S&P 500 or the Dow Jones Industrial Average. In fact, the most popular ETF of all-time, Standard & Poor’s Depositary Receipts (AMEX:SPY), is an ETF that tracks the performance of the S&P 500.

Bond funds: Another type of investment represented by ETFs. Funds like the iShares Lehman Inter Govt/Credit Bond ETF (NYSE:GVI) aim to match Lehman Bros. bond indices (which continue to operate under Barclays ownership).

Commodities ETFs: A category of exchange-traded fund that has popped onto the scene recently. Commodities — like oil, gas, grains, and gold — were once a tougher market to get into for small investors. Now commodities plays like the U.S. Oil Fund (AMEX:USO), which significantly outperformed the S&P 500 in 2008, are showing the financial world that opportunities abound in the ETF world.

Managed ETFs: In 2008, the Securities and Exchange Commission decided to allow actively managed ETFs for the first time, meaning that ETFs weren’t relegated to tracking an index or commodity. The first group of actively managed ETFs was put out by PowerShares in July 2008.

Finding Small-Cap ETFs

As a penny stock investor, small-cap ETFs are a very interesting idea. There are a number of index ETFs that invest in small-cap plays, including the iShares Russell 2000 Index ETF (NYSE:IWM), the Vanguard Small-Cap ETF (AMEX:VB), and the iShares Morningstar Small Core ETF (NYSE:JKJ).

We’ll continue to pour through the hundreds of different funds available to small-cap investors. We’ll let you know when we find something worth investing in.

Source: Small-Cap Investor’s Guide to Exchange-Traded Funds (ETFs)