Is Small Cap Investing Right For You?

TechnicalBuy focuses on Canadian small-cap biotech and resource companies. These companies are often at a very early stage of exploration/development without any revenues. Investors buy these companies based on the chance that the company will become successful and in turn provide a great return for their early-stage investment.

In general, small cap stocks are riskier as an asset class, since many small companies fail to develop into a viable business. However, if a small company does succeed, it generally results in very handsome reward for the investor. Investing in small cap stocks therefore is not for everyone. Such investments are more suitable for growth investors, who are willing to take more risk and have longer investment horizon.

Do Your Own Due Diligence

TechnicalBuy (TB) does not and cannot provide investment advice nor recommendations to buy or sell stocks. TB's opinions are believed to be accurate at the time they were published, and although TB does its utmost to provide accurate information, TB provides no guarantees of any sort. TB does not accept any responsibility for any errors or omissions. Finally TB accept no responsibility for any outcome resulting from reading of TB's opinions. What that means is that these are TB's personal opinions and you must do your own investment due dilligence. You alone are responsible for investing your money and making investment decisions. Therefore invest accordingly.

Trading Small-Caps

Small-cap, or penny stocks, are susceptible to volatility due to their size - it takes less volume to move the stock price up or down. It is common for a penny stock to fluctuate 5-50% in a trading day, something some investors simply cannot stomach. Stocks can easily double or half in price based on a single news release. Likewise stocks can appreciate in price in anticipation of a news release. With all the volatility it is not only risky to trade in penny stocks but a different trading mindset is required in comparison to say blue chip stocks [TB update: funny how things change. I wrote this sentence in 2007 before Bear Sterns, and Lehman Brothers went bankrupt, before RIM's stock nosedived, before LinkedIn IPO doubled in minutes. Volatility is clearly not confined to the small-cap sector]. If you are not an experienced trader you should educate yourself on penny stock trading first, before investing. I'll also note here that "buy and hold" is generally not a successful strategy when it comes to small-cap investing. Gyrations in the stock price will provide buying and selling opportunities throghout the year. The trick is to "buy low and sell high".