Tag: small cap stocks

What are small cap stocks?

Small caps stocks are companies with a “market cap” (the value of shares they have outstanding) below, say, $250 million, or some other arbitrary figure.

Many investors think of the “small cap group” as the place to look for aggressive investments, such as junior companies that will develop into seniors and make huge gains for investors. Some small caps will indeed turn out that way, but you’ll need to choose carefully. That’s because small cap stocks vary widely in quality.

The top small caps are well-established firms in growing fields with a least a record of rising sales. However, many small caps are start ups that have yet to make their first profit. Some succeed brilliantly, and these are the hot small cap stocks we aim to help you spot in our Stock Pickers Digest newsletter, but lots of others go broke. Then too, some small caps are former large-cap companies that have serious problems. These stocks now trade as small caps, but may be on their way to zero.

If you’re going to hold a small cap stock in your portfolio, we recommend that you only hold the very best. We also recommend using our three-part Successful Investor philosophy:

  1. Invest mainly in well-established companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
  3. Downplay or avoid stocks in the broker/media limelight.

Most investors who successfully build wealth over the long term follow certain investing practices. Find out what they are in our FREE investing guide, The 10 Best Practices of Successful Investors.

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Here’s a Look at the Pros and Cons of Small Caps

April 29, 2024||Growth Stocks

Unlocking superior returns with small-cap stocks involves navigating the high-risk, high-reward landscape.
Investing in small-cap stocks can offer the potential for superior returns compared to their larger counterparts. However, this opportunity comes with inherent risks. Shares of smaller companies tend to be more volatile, less liquid,… Read More

Mid-cap stocks could boost your portfolio

July 12, 2018||ETFs

Mid-cap stocks, like middle children, don’t always get the attention they deserve. But, that has failed to hold back several top stocks in this overlooked category.
What are mid-cap stocks?
Mid-cap stocks fall between large-cap stocks and small-cap stocks, but their size varies from stock market to… Read More

Small companies have appeal but also risk

February 8, 2018||ETFs

Smaller companies can generate higher returns than their larger counterparts, but they are often riskier and less liquid, and may underperform for long periods.

Small stocks are also more volatile in times of unsettled or falling markets.

Still, if you focus on the best-quality small companies— or… Read More

Pass on this ETF

February 8, 2018||ETFs

ISHARES S&P/TSX SMALL CAP ETF $16 (Toronto symbol XCS; TSINetwork ETF Rating: Aggressive; Market cap: $121.1 million) invests in smaller listed Canadian companies.

The ETF holds 197 stocks, with the top 10 comprising only 13% of its assets. This gives it the appearance of a well-diversified… Read More

Small-cap ETFs aim for growth

February 8, 2018||ETFs

Smaller firms can sometimes generate higher returns than their larger counterparts, but they are often riskier, less liquid, and may underperform for long periods. One way to offset some of the risk is to focus on ETFs that hold top-quality small-capitalization companies.

Here we look… Read More