Micro Cap Stocks

Micro Cap Stocks

Micro Cap Stocks

A small business that is publicly listed on the share exchange and has shares that cost less than $5.00 each to buy is classified as a small cap share.

If we expand on that further then micro cap stocks:

1) Have been in business for greater than 3 years but will have less than 2 million dollars in assets.

OR

2) Are a relatively new company and only been in business for less than 3 years but does not have more than $5 million assets in total.

{For more information about investing in Micro Cap Stocks check out this extensive guide Penny Stock Investing}

Stocks that fit into the micro cap definition are trying to establish themselves in whichever niche they fit into and do not tend to have had a long history. As these companies are still establishing themselves, investing in them can be quite risky; however they are becoming increasingly popular with investors because there is the potential to make large gains from a small investment..

It is usually quite easy to determine which micro cap companies are the hot stocks of the moment, but before investing any money you should always perform a background check first. You will want to ascertain if the hype that is being circulated has in fact any substance to it, i.e. you will want to find out about the stocks financial position and what the experience of management team is like as a useful starting point but your research overall should delve much deeper.

{For help in regards to investing in micro cap shares Micro Cap Stocks}

Failure to adequately check out a company before you invest can result in you becoming caught up and in what is referred to as a 'pump and dump' type scenario. What happens is that false hype is spread about the company causing investors to rush in and buy the share causing the price to spike and those responsible for generating the hype can sell the shares they own to unsuspecting investors and then a large sell off results in the share price plummeting and you sustain a loss, often quite significant at times.

Start you research by checking out the small cap shares available on the pink sheets or the Over the Counter Bulletin Board (OTCBB), where you can find a list of over 3000 different stocks and get real time prices for them. Check out both exchanges and once you've identified the stock you're looking to invest in, it pays to double check it on both exchanges. It is generally considered that stocks listed on the OTCBB are a bit better than those listed on the pink sheets..

There are many inherent risks associated with investing in micro cap shares as often the information you receive is not always that reliable. No matter who tells you about a hot share you should always check it out yourself before you buy..

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