If you are a conservative investor, using the mutual fund route is the best way to invest in stocks. But if you are game for some excitement, you might want to dabble directly in stocks, especially small-cap stocks.

Stocks that are smaller in size, in terms of market capitalisation, carry higher risk. The reasons are — one, lower traded volume increases price volatility, two, information is usually scarce on these companies, three, business risk is higher since many of these companies are dependent on a single product and four, governance risk is also higher in these stocks.

That said, small-cap stocks have the capacity to deliver far greater returns when compared to large-cap stocks. Sample this: there were 16 stocks with market cap more than ₹50,000 crore in January 2009. These stocks delivered an average return of 138 per cent in the last eight years but 4 out of every 10 stocks in this group delivered negative returns.

On the other hand, there were 1,582 stocks with market cap less than ₹5,000 crore in January 2009. These have delivered 695 per cent returns till date and just a fourth of these delivered losses.

We have picked five stocks with market capitalisation of under ₹5,000 crore, for those ready for some risk. These stocks have delivered more than 20 per cent growth in revenue and profits in recent times and are operating in exciting niches. You can consider spicing up your portfolio with one of these dark horses.