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The Differences Between Micro Cap Companies and Others

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What Are Micro Cap Companies?

Micro Cap CompaniesYou should not confuse micro cap companies with small businesses, though many of them are small in comparison to other publicly traded companies. The term micro cap refers to the amount of market capitalization that exists for the company. This is the combined total value of all its stock shares. Many micro cap companies have only a few millions dollars in total capitalization or less. The price of each share is usually low and they are not traded in high volumes.

 Penny stocks and micro cap companies are also distinct, though some micro cap companies may issue penny stocks. Micro cap stocks are usually higher risk than other stocks, but they are not as risky as penny stocks. It is usually easier to investigate and research micro cap companies.

 How Do Micro Cap Companies Differ from Other Publicly-Traded Companies?

Like most penny stocks, micro cap companies do not file much information with the SEC. This makes them seem very different to the average trader, who is used to getting everything that he needs to know about a company from the SEC’s website. This lack of information sometimes signals that offers to sell these stocks are a species of investment fraud.

Due to this lack of oversight and the information gap, micro cap companies make for very risky investments. That might make you wonder how these companies continue to exist. Risk, however, continually draws people to certain stocks.

It is important to have some risky stocks in your portfolio. Some traders and investors pick a few micro cap companies that show some unusual promise to include among their holdings. If you research micro cap companies well, it is always possible to find one or two that show some real potential for growth and profits.

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