The Globe and Mail reports in its Wednesday edition that Canadian small-cap stocks have not had a good time recently. Globe columnist Gordon Pape writes that the S&P/TSX SmallCap Index has a one-year loss of 4.93 per cent and a 10-year average annual compound rate of return of 0.86 per cent. However, if you choose carefully and get a bit lucky, you might find gold. The best-performing stock on the Toronto Stock Exchange over the past five years, little-known Hammond Power, was recommended at $8.60. It closed Friday at $93.21, up 983 per cent, not including dividends. Mr. Pape believes the best way to invest in small caps is to create a broader portfolio of 20 to 25 stocks that includes five to 10 carefully selected stocks. They should focus on profitability, growth, a strong balance sheet and quality management. Of these, a couple will likely significantly underperform, a few will produce average returns, a couple will outperform, and one or two could be big winners that will more than offset your losers. If you want to go a different route, there are some exchange-traded funds to consider. The iShares S&P/TSX SmallCap Index ETF (XCS) tracks the performance of the index of the same name, net of expenses.