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What are micro cap stocks?

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The basics of micro cap stocks

Micro Cap StocksMicro cap stocks represent a different type of investing. First, these stocks are not listed on typical security exchanges or on the NASDAQ. These stocks are offered by smaller companies, typically with less than six million dollars in assets. The companies often have far less public information available than one might think, and they are often particularly risky. This does not mean that every one of these stocks represents a bad investment. It merely means that one should invest with caution.

How micro cap stocks work

 Unlike typical stocks, the micro cap stocks trade on the Over the Counter Markets. Unlisted on the NASDAQ, these companies have far fewer assets than most listed, and generally do not report to the SEC. As such, these companies represent a certain level of risk that is uncommon even among the most unstable of typical stocks. Micro cap stocks are often offered by relatively new companies, though there are many in the market that attempt to convince those investing that they are somehow related to a company that actually has a NASDAQ listing.

As with any kind of investment, micro cap stocks represent rewards in kind with their risks. Public information about many companies is limited, and the sheer amount of risk involved is staggering. Getting in on the bottom floor of a stock that might be offered by a company that is about the change the world, though, can be a tempting offer. As always, it is important to make sure that you use your own common sense when deciding whether or not to invest. Always remember to ask your broker for as much information on micro cap stocks as possible before investing, and always feel free to walk away if things do not seem to be legitimate.

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