(MONEY Magazine) – Individual investors have had reason to smile lately. The new MONEY Small Investor Index at right, which mirrors the performance of the typical individual investor, increased 1.25% in October to bring the overall gain for the past 12 months up to 10.73%. Historically, small investors earn 9% a year. MONEY's exclusive index, which is making its monthly debut in Investor's Scorecard, tracks the gains and losses of 10 assets in four broad categories -- stocks, bonds, cash and inflation hedges -- according to their representation in the portfolio of the average American household. October's boost came from solid returns across the board except for small stocks, which declined 0.62%. The next few weeks could be less cheery, however. If the U.S. Labor Department issues another set of strong monthly employment figures, as it did in early November, look for short-term interest rates to increase by perhaps half a percentage point. Many economists believe robust job numbers will heighten inflationary fears and cause the Federal Reserve Board to tighten credit, leading to the higher rates. Even assuming rates drift up, Arnold Kaufman, editor of Standard & Poor's newsletter, Outlook, says electric utilities stocks may charge ahead. He notes that regulators are likely to keep approving rate increases. He also favors watching pollution-control stocks. Kaufman thinks they will benefit from Congress' newly reauthorized Superfund cleanup.

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