About the Small Cap Investor and Small Cap Investments
A small cap investor usually has different goals and opportunities than the more traditional large cap investor. When you invest in these smaller companies, you are dealing with a different animal than you are when you deal with much larger investments. They also have different impacts on your portfolio.
A small cap investment is usually a company that has a market capitalization of somewhere $300 million and $2 billion. That may not seem very small but it is much smaller than some of the large cap and mega cap businesses who have total stock values in the hundreds of billions. However, small cap investments should not be mistaken for micro cap stocks. A small cap investor is still investing in stocks available on the major stock exchanges and therefore works under the protection and the supervision of the SEC.
Advantages of a Small Cap Investor
The small cap investor has more than one advantage over large cap investors when it comes to making profits. He or she is actually able to choose from a greater variety of equities than an institution can buy. Small cap investments also have the possibility of experiencing exponential growth under the right conditions.
Mutual funds, in which a lot of large cap investors place their money, are restricted from purchasing large amounts of shares in one company. This restriction has little to do with value and everything to do with control. Mutual funds cannot take over a company. If a fund does want to buy large amounts, it has to file an appeal with the SEC to get permission. Since doing this would alert the rest of the market to the move, it would push up prices and ruin any chance the institution had of getting a good deal. The small cap investor suffers no such restriction on investment choices.
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