Microcap stocks are publicly traded stocks, which investors can get at very low prices per share. Most of them are available for less than 5$, but you can even get some for as little as $1. These stocks tend to be linked with small firms that are yet to establish themselves in the market. One of the main advantages of these stocks is that you can buy them at a very low price and this gives you an opportunity to make significant returns from your investment. However, these are not liquid stocks and this means that you can lose all the money you have put in. The companies that offer penny stocks are lowly placed in the market and most of them have weak financials. This makes penny stocks more risky than normal stocks.
In spite of the risk, you can make a lot of money when you purchase these shares. It is advisable to do the trading on your own instead of relying on a broker. This is because they are not available on the main exchanges including the NYSE and NASDAQ. It will be better if you are directly involved in the trading process. There are various factors that you should consider if you are thinking of putting money in these stocks.
Short Term Investment.
It is essential to identify if the particular stock that you are interested in matches with your investment approach. The companies that offer these stocks can go out of business within a short period. If you are looking for a short term investment, microcap stocks are appropriate. Penny stocks are not appropriate for long term investment.
The high risk involved in penny stocks makes it necessary to use a cheap broker online service. Search for the most basic service on the internet. A brokerage service is important because it makes it possible for you to open an account. The online option is better because you will spend less on deposits and purchases. You have to watch the prices changes of the stocks you choose. This is another reason why an online service is advisable.
These stocks are not the same as the ones that are available on the leading exchanges. You have to trade them over the counter. This means that there is no set price for the shares. You will buy a share at a particular price and then sell it off at your preferred price. You will find varying prices depending on the seller. However, it is important to makes sure that your bid price gives you a return on the investment that you made.
You have to carry out comprehensive research on the firms that are offering the microcap stocks. This will allow you to make an informed decision about the investment. You need to identify the least volatile stock. Most of the companies are startups and it may be difficult to get adequate information on them. However, you have to know their financial situation before you put in any money into them. Yahoo Finance and Google are valuable resources if you want information on the companies. This helps you to avoid fraud and save your money.