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Saturday, June 26, 2010

Why Investing in Small Caps?

Some of the unique advantages of investing in small cap stocks are:

1. Small companies adapt fast to changing environment - they are nimble and can therefore move fast.

2. Given low liquidity, while retail investors can buy small caps, many fund managers cannot - so retail investors have a first mover advantage with a good small company.

3. Small caps are high in demand but less in supply - that means prices rise really fast when demand increases.

However, there is one drawback when it comes to small caps i.e High Risk.

The problem is that many people don't understand this or they understand it but don't take it seriously.

Smaller companies typically have fewer competitive advantages and financial resources to bear a market downturn. So, when there is a sell-off in the markets, small caps are more "risky" to hold.

We believe that small caps don't comprise a big portion of your portfolio. Probably 20% at the most. 80% portion should be of large and mid cap stocks. But that doesn't mean you don't need to bother about them at all. This small part of your portfolio does the key job of maximizing your returns.

Through Hidden Gems, we're providing you opportunities to invest in such small caps stocks today. Infosys, Pantaloon, Unitech, Glenmark were the small cap stocks in past and today are the well known companies falling under mid and large cap space. Do note that only small cap stocks have the true growth potential with high probability to become multibagger stocks in couple of years.

The stocks we reveal through Hidden Gems are companies that are either under-researched or not covered by other stock brokers and research firms.

Note: Introductory offer of Hidden Gem closes on 30th June. Read more on our services Hidden Gems.