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The JSE Small Cap index consists of all the shares which are included in the JSE Overall Index – except for those in the JSE Top 40 and the JSE Mid Cap. The Top 40 index is an average of the 40 largest companies in the JSE Overall index, followed by the mid-cap index which is the next 60 largest companies and, finally, the small cap index which is an average of the balance of the shares in the JSE overall index. At the time of writing, there were 61 shares included in this index. The largest share in this group was Investec Property Fund Ltd, with under 4%. Other shares with a 3% weighting were Transaction Capital, Equites Property Fund, PPC Ltd, Datatec, Sun International, Advtech and Astral Foods. So this is a fairly well-balanced index of smaller companies with no dominant shares. When looking at these shares pay attention to the average daily volume traded. Some of them are very thinly traded and will be difficult to stop out of. Many of these shares are listed in the Alt-X and they are typically smaller companies which have recently obtained their listing and which are in a strong growth phase. This clearly makes them much higher risk for the investor than companies in the mid-cap index, but they can also offer very good returns – if you pick the right one. Usually the CEO of one of these companies will be happy to grant you an interview if you tell him that you are an investor. It is well worth visiting the premises of such companies and seeing first-hand how they make their money. You can often learn much more from the CEO’s face and attitude than from his financial results. It is also interesting to compare the small cap index with other indexes – like the Top 40 index or the mid-cap.

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