Is it a good time to add small-company stocks to portfolio?

— -- In springtime, you may think about what your grandmother told you about farming. "If you feed the horses, you feed the sparrows, too," she'd say, with a twinkle in her eye.

Of course, your grandmother grew up in the city and would also say things like: "Fertilize a flower, stab a weed." Nevertheless, it's astonishing how long old sayings persist, even when they're no longer meaningful to the speaker.

Many people keep money in small-company stock funds because they have heard that over time, small-cap stocks fare better than large-cap stocks. Although there's some truth to that, you should add small-caps sparingly.

Small-company stocks have a market capitalization of about $1 billion or less. Market cap is a company's stock price multiplied by its shares outstanding. ExxonMobil, the nation's largest company, has a market cap of $332 billion. Much smaller Western Refining, which refines crude and runs service stations, has a $901 million cap.

Ibbotson and Associates, the Chicago research firm, says small-cap stocks have gained an average 11.4% a year since 1926, while their large-company brethren have gained an average 9.4% a year. So over the long term, small-cap companies do indeed beat large-caps.

The past 30 years haven't worked out quite as neatly, according to a different set of data from Russell Investments. The Russell 2000 index, which measures small-company stocks, has gained 1,479%, including reinvested dividends. The Russell 1000 index, which measures large-company stocks, has soared 1,779%.

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So should you invest in small-cap stocks?

In the broadest sense, you probably don't need them. Suppose you'd put 30% of your portfolio in small-cap stocks 30 years ago and 70% in large-cap stocks. You would have gained 1,688% and increased the portfolio's up and down movements slightly. So a mix of small- and large-cap stocks didn't increase performance or reduce volatility.

Furthermore, if you buy a dedicated small-company stock fund, it will sell stocks that grow to become midcap or large-cap stocks. Often, that means missing a company's hottest years.