Posted on 03 January 2012.
In the current economy, it is becoming increasingly common for even the most seasoned investors to turn to micro cap stocks. In order to understand this phenomenon, it is important to understand what makes these stocks different from other stocks. A micro cap is any stock owned by a company that has a market capitalization of $300 million or less. While a few of these stocks are traded on the regular market, most are considered to be over the counter (OTC) stocks, also known as penny stocks. They are sold at five dollars or less per share and are known for their fluctuations in value.
Although micro cap stocks are generally sold on the OTC market, they are different in a number of ways from other types of penny stocks. Many penny stocks are actually considered to be nano cap stocks, which have a market capitalization of less than $50 million. Micro caps are generally worth more and are more stable than nano caps. Their companies have usually been around for longer, meaning that they are easier to research and that the information you find is more likely to come from a reputable source.
If you are interested in investing in micro cap stocks, there are a few steps you should take before you make your first purchase. You should take advantage of the greater amount of information out there and research as much as you can about the company and the product you are investing in. Know their financial history and understand how they currently manage their finances. Make sure that you really believe in their product. If you do not believe in it, chances are that nobody else will either. Only once you have fully researched your micro cap stocks should you make your first investment.
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