Penny stocks has both a higher average return, and higher risk. They also are more independent of the market conditions. Penny stocks is an excellent investment during recession. When most established firms aren’t doing to well, rich investors may take 5 from these to concentrate on microcap investing. This means more liquidity in the microcap incestment sector – and liquidity equals money.
Microcap investing companies are tiny corporations, with enormous expansion potential. They’re more responsive to monetary stories, as new developments and approval of funds, than bigger corporations. Lets do an example: A tiny furniture company has simply a landed a contract with the nations biggest junk food chain, to begin to use their furniture in eateries all across the land. I guarantee you that folks would line up to take a position in the little furniture company. This contract wouldn’t mean that much for a large million buck furniture company which has contracts across the world, but to a little company it is gold.
An enormous cap stock is considered solid if it has an once a year expansion of 10 %. Microcap investing nevertheless, can gain 20-30 per cent in just one day! Some stocks may even jump tons of p.c on a positive announcement. If you understand how to pick the winners, and milk these large price jumps, you can possibly make a bundle.
Just mull it over, it’s a great deal easier for a stock to double up from two to 4 cents, than doubling up from twenty to forty bucks. Still, if you invested 1,000 bucks in the twenty dollar stock, you would get the same % return as the penny stock. Huge percentage gains like in the example above, occurs a load more in microcap investing, than in enormous “blue chip” firms. Not to say that they occur over a shorter time period. This is the reason why there are so much opportunity in the microcap investing.