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Wednesday, June 23, 2010

Benefits of Investing in Small Cap Stocks

A small cap stock, or micro-cap stock, is a stock with a pretty small amount of market share. Most companies differ on their opinions of this, but many firms say that means it is between Rs 250 million and Rs 2 billion in market capitalization. Many people see this as an extreme opportunity.

Mutual funds often have restrictions on what they can purchase to include in their funds, because if a company is smaller, they would have to purchase a large percentage of available shares to put an adequate amount of that stock into their fund.

Small cap stocks are extremely valuable; as they are typically the most sought after for acquisition purposes and have high value potential in the future. The trick is, deciding which small cap stocks are the best for your individual portfolio.

There are often many undervalued micro-cap stocks available for purchase, and if you invest at the right time, you may be able to make a great deal of money on something that may have not been well predicted.

To find the best micro-cap stocks to invest in, you can contact an investment professional who can walk you through their picks. They will of course charge you a commission percentage off of your earning. You can also contact larger brokerage houses to set up a brokerage account, many of which charge per trade as opposed to on a commission basis.

The best small cap stocks to invest in are ones that are about to make a large announcement, purchase another company to acquire, or offer a new product that will be important to the marketplace. Health care and technology stocks often fall into this category. Many restaurants often wind up in micro-cap stock recommendations, if they are planning on expanding in a large way or offering new menu items.

Because the best small cap stocks recommendations will always be changing, it is important to get up to date research on advice, either by contacting a professional or doing your own research.