For the 12 months ending March 31, the Russell 2000 index of small-capitalization stocks was down 13%, compared with a drop of 5% for the Standard & Poor's 500 Stock Index, a measure of widely held large-cap stocks.

But small stocks often lead the charge when markets eventually recover, making this a good time to invest, fund manager Michael Petroff says.

To limit risk, Petroff focuses on solid companies with little debt and improving earnings. He particularly favors companies with track records for increasing their dividends. The dividends provide steady income and dividend-paying companies tend to have reliable cash flows, which can help them to withstand economic slowdowns.

Lately, Petroff is avoiding companies that are being hurt by problems in the mortgage markets. Instead, he is seeking businesses that seem poised to thrive in today's difficult economy. Two of his favorites...

Asset Acceptance Capital Corp. (AACC). This company, which has a market capitalization under $380 million, collects bad debts. Business is booming at a time when credit card companies and healthcare providers are facing rising default rates. Recent share price: $12.35.

Federal Signal Corporation (FSS). This company, whose market cap is under $640 million, makes wireless communications systems used by police and fire departments. Sales are rising, as cities spend more on technology that can improve security. Recent share price: $13.46.

Bottom Line interviewed Michael Petroff, portfolio manager of the Heartland Value Plus Fund (HRVIX). It had annualized returns of 18.5% for the five years through March 31, about four percentage points above the Morningstar, Inc. average for small-cap value funds.

Q: I officially retire in several months. However, I want to work part-time. Is there a service that lists part-time jobs for retirees? I've looked through the Web sites of AARP, Retired Worker International and 2Young2Retire. What else is there?

A: At the Senior Job Bank (888-501-0804, www.seniorjobbank.com), employers post positions that they wish to be filled by people 50 or older. The service is free to job seekers. You can search by type of work, by state and by hours (full-time, part-time, short-term contract, long-term contract and per diem). You'll find a description of the job, the location, the hours and where to send your résumé. Senior Job Bank, based in Marlborough, Massachusetts, has been in business since 1975.

Keep in mind that volunteer jobs can lead to part-time work.

Our inside source: Nancy Dunnan is a financial adviser and author in New York City. Her latest book is How to Invest $50 - $5,000 (HarperCollins).