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Friday, July 23, 2010

How to Get Rich with Small Caps?

Have you ever wondered why it seems that the only people getting rich are… the rich?

To the small investor, it may look as though you have to have a sizable amount to invest in order to make any money in the stock market. But it doesn’t have to be that way. One of the best kept secrets on Dalal Street are micro-cap stocks.

Investing in micro-cap/small-cap stocks levels the playing field for everyone. When you invest in these low-priced stocks you don't have to be rich to get rich. In fact, many investors begin trading micro-cap stocks using Rs. 2,000 or less.

If you were to invest Rs. 2,000 or less in say, Reliance or TCS, your investment wouldn’t get you more than two or three shares. However, when you invest in micro-cap stocks, you’re paying just pennies per share. So that same Rs. 2,000 can get you 200 shares or more in a variety of stocks!

Also, when you invest in micro-cap stocks, you’re usually getting in when the stock is poised to grow, but the stock price doesn’t yet reflect the company’s potential. Getting in on the ground floor of trades like these, you can easily see the stock double or triple in a matter of days.

Contrast that with the big, slow-moving Blue Chips, where you’ll be luck to pull 8% in a year. To use the example of Reliance, to get an 8 - 10% return on investment, the stock would have to go up Rs 85 to Rs. 100 a year. However, when you talk about micro-cap stocks, a stock with a 10 Rupee entry price only has to increase by 50 Rupees per share to create gains of 500%!

In the case of micro-cap stocks, a gain of only 40 Rupees a share can make an astounding difference in the return investors receive, especially when those investors are able to take positions of thousands of shares very micro-caply.

Micro-cap stocks offer a real-life way to do exactly what all the stock market gurus tell you to do: Buy Low; Sell High. Investing in micro-cap stocks levels the playing field for the small or beginning investor, and allows them to make the kinds of profits only the trading giants usually see.

This is really the ultimate “underground secret” of how rich traders get rich while others flail and fail. The most successful investors don’t invest in well-known stocks, but rather, in companies that most people have never even heard of.

Micro-cap & small cap stocks own high probability to give exponential returns in long run and aren’t for everyone, but that's the way we like it at Saral Gyan. Knowing that value comes in all shapes and sizes has been a well-kept secret of smart investors over the years, and our Hidden Gems helps our investors beat the market in long run.

Hidden Gems subscribers receive breaking recommendations on micro-cap/small-cap stocks every month based on sound and unbiased research reports prepared by our team of equity analysts.