Yet, you may be well served to help clients avoid making such knee-jerk reactions. With that in mind, advisors would be well served to articulate why it may make sense to continue investing in the out-of-favor small-cap portion of the market.

Clients’ concerns about small cap stocks are understandable. As of late July, the Russell 2000 Index has a flat year-to-date return, while the S&P 500 is up more than 8%. For the one-year period ended in late July, the Russell 2000 Index was up 11.32%, which is substantial but still considerably lower than the more than 19% return of the S&P.

At the same time, the Russell 2000 has exhibited considerable price swings, sometimes climbing or declining by more than 1% in a single day.

The recent performance is a substantial change from last year, when the Russell 2000 Index climbed more than 40%. The performance was a result, in large part, of price-to-earnings ratios climbing as earnings growth trailed the equities’ price gains.

The higher P/E ratios of many of the Russell 2000 constituents are driving fear that the stocks are overpriced. What’s more, Goldman Sachs recently issued a warning that small-cap stocks are expensive relative to the S&P 500 and in absolute terms.

Yet, advisors should consider a variety of factors before dismissing small-cap stocks, not the least of which is the need to maintain diversified portfolios. Indeed, no one can say with certainty which asset class will outperform in the near future and which category of stocks will be volatile, so it’s important to maintain a diversified portfolio to smooth out equity returns.

That doesn’t mean that advisors can’t fine tune their asset allocations based on their outlook for different asset classes, but such portfolio changes are just that—small adjustments to holdings rather than a mad dash out of a specific asset class.

At the same time, various factors may be supportive of small cap stocks. Broadly speaking, small-cap stocks tend to lead during periods of economic expansion. While the ongoing economic recovery has been sluggish, it has been steady and has been showing many signs of progress, with unemployment declining, manufacturing expanding, and the housing market strengthening.

According to Bloomberg, sales for S&P 500 members climbed 3.3% during the second quarter, which is most likely a result of the economy expanding. As the numbers of Americans returning to work increase, more individuals have income that allows for discretionary spending.

Small cap stocks may also benefit if the U.S. dollar strengthens. The Federal Reserve’s reining in of quantitative easing combined with little or no inflation is likely to support the U.S. dollar, which will make U.S. exports less attractive. Unlike larger companies, smaller companies typically have less exposure to non-U.S. markets, so they may be less susceptible to a rising U.S. dollar.

Small cap stock performance may also get a boost from increasing merger and acquisition activities. U.S. corporations have record levels of cash on their balance sheets, so they have considerable capacity for making acquisitions. What’s more, merger activity is expected to increase as corporate executives become more confident in the economy. In many cases, companies find smaller corporations attractive as acquisition candidates, and pay price premiums for the companies.

No one can say with certainty when the disappointing performance of small-cap stocks will end, but one this is clear, the results of the Russell 2000 Index this year underscores the need for advisors to help clients navigate difficult market environments by avoiding panic-selling and by keeping a long-term focus on portfolio management.