What Are Small Cap Stocks?
Small cap stocks is not hard to understand. It means simply that companies who have a market capital of less than 500 million are small cap stocks. The stock market does not value a firm by the number of employees or even its profit but by the market value it holds.
Just like penny stocks, small cap stocks do not have a very good reputation in the stock market and therefore, are overlooked by many investors. However, these overlooked small cap stocks have the potential to make an everyday Joe a millionaire over a very short period of time. Of course like everything else 'small cap stocks' also have their pros and cons.
Advantages of the small cap stocks are such: Many small cap companies have larger growth potential because they are new to the business. This leads to larger profit margins because there is more potential in expanding and making more money than companies that have been around for many years.
Disadvantages: Involves a lot of risk: the stock market in dominated by big companies. Therefore, if you decide to invest in a small company that is later forced out of the business or is bought by a bigger company then you will lose out on the money that you have invested in its stocks.Short history: small companies have shorter history compared to big companies. Hence, you may not get the necessary information that you need before putting in you hard earned money.Fall in the stock price: it is often seen that the stock price falls dramatically as a direct result of a number of reasons. The most common reason for such a situation is when the company is going through an economic crisis, which may even lead to bankruptcy. So it is advisable that you should always try to make sure that there is a good scope for the stock price going up.
The media usually talks about the risks associated with small cap stocks but remember to do your research and you can make good investments with small cap stocks too.
In conclusion, just remember to do your research and ensure that you pick a stock that has a growth potential and do not be afraid to take a risk for a large return. - 23217
Just like penny stocks, small cap stocks do not have a very good reputation in the stock market and therefore, are overlooked by many investors. However, these overlooked small cap stocks have the potential to make an everyday Joe a millionaire over a very short period of time. Of course like everything else 'small cap stocks' also have their pros and cons.
Advantages of the small cap stocks are such: Many small cap companies have larger growth potential because they are new to the business. This leads to larger profit margins because there is more potential in expanding and making more money than companies that have been around for many years.
Disadvantages: Involves a lot of risk: the stock market in dominated by big companies. Therefore, if you decide to invest in a small company that is later forced out of the business or is bought by a bigger company then you will lose out on the money that you have invested in its stocks.Short history: small companies have shorter history compared to big companies. Hence, you may not get the necessary information that you need before putting in you hard earned money.Fall in the stock price: it is often seen that the stock price falls dramatically as a direct result of a number of reasons. The most common reason for such a situation is when the company is going through an economic crisis, which may even lead to bankruptcy. So it is advisable that you should always try to make sure that there is a good scope for the stock price going up.
The media usually talks about the risks associated with small cap stocks but remember to do your research and you can make good investments with small cap stocks too.
In conclusion, just remember to do your research and ensure that you pick a stock that has a growth potential and do not be afraid to take a risk for a large return. - 23217
About the Author:
Find out What is Penny Stock Trading. You too can learn what is Penny Stock Trading.
posted by X - Men @ 4:57 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home