Small cap stocks are one of two basic types of stocks that you can invest in. Cap is the industry term for market capitalization, a measurement of a company that is calculated by multiplying a company's current price per share by the number of outstanding shares it has.
While large cap companies are the huge conglomerates and companies famous around the world, smaller companies with cap values of between 300 million and two billion dollars are generally considered to be small caps.
Some investors overlook these stocks as not worth their time, and focus only on the major companies. But the truth is that there is plenty of money to be made investing in the best small caps.
Small caps can offer benefits that the large companies don't. Since small caps are from small businesses, there is room for massive growth and massive gains.
The larger companies fluctuate in small increments, since it's harder to make huge gains when you are a large company. But all large companies were small once, and those small caps have turned into very rich investments. Microsoft, for example, was once a five dollar stock. Look at it now.
Businesses fail quite frequently, however, so there are more risks that come along with the potential benefits of small caps.
Your picks must be made based on solid research in order to realize the gains that they can provide. The potential is there, but you need to make the right decisions.
Plenty of advice is out there as to the best small cap stocks at the moment, and we offer some advice on our picks. But if you decide to handle research on your own there are a couple of things you can look for.
As always, market trends are important and watching them can help you gauge when the best time to buy small caps from a certain company is. You should also keep an eye on the recent gains that the stock you're watching has been making.
Knowing which stocks to buy and when you should sell them is important, and we offer a number of small cap stock picks to help you make a good investment. When you're ready to buy, it's as simple as purchasing any other type of stock, especially if you're using an online broker. Simply key in the company symbol and buy.
Once you've made your purchase, keep a close watch on your stocks. When the price reaches the right level, sell and enjoy your gains. It could take days, weeks, or months. But knowing when to sell is just as important as knowing which small cap stocks to buy.