Smaller stocks offer chance of biggest returns

For big returns, buy smaller companies - that's the takeaway from previous UK elections.

The FTSE 250 Index rallied almost 18 percent on average in the 12 months following a general election, according to data since the 1987 vote. That's more than twice as much as its annualized returns and double the advance of the FTSE 100 Index, which follows the biggest stocks in the market.

The mid-cap gauge tracking companies such as Provident Financial Plc and betting firm William Hill Plc has usually beaten the FTSE 100, but its outperformance is particularly great in years following a general election. That's because policies implemented by new governments benefit companies whose revenue come mostly from the UK, according to Peter Garnry, Saxo Bank A/S's head of equity strategy.