May 13 2017

The Upside and Downside of Micro-Cap Investing Discussed by CL King Experts

If you are unfamiliar with the definition of micro-cap investing, this is where money is invested into a company which has a value of approximately £15 million or less. The main upside of making micro cap investing can be the returns – which can have a larger profit margin than the larger-scale investments made by firms that trade a large number of liquid shares on a daily basis.

Because many of these smaller businesses have the scope to expand phenomenally as time goes on, research has shown that as small of an investment as £600 could grow into as much as £50 million over a period of four decades: an astronomical amount of money to consider. Of course, even though the advantages of these gains are clear, it is always being worthwhile consider the risk associated with micro-cap investing – just like there are dangers to all types of investments made.


Of course, many of the best businesses do not remain at a low value for long. As a result, these new businesses are likely to have elevated amounts of risk in comparison to more established companies that have trends and past data for you to analyse before you make an informed decision. As a result, you can find that you are making something of a leap of faith if you choose to opt for a company with such a low value.


Because of their initial lower value, there can also be fewer stocks available – and even the slightest change in the ownership of stocks and shares can have a large impact on prices. You can find that the world of micro-cap investing can be a bumpy ride, and one with many highs and lows, so it can be important to ride out the slumps that you may be experience when micro-cap investing doesn’t go as planned.


All in all, you need to know as much information about the company in which you are planning to invest before you decide to part with your hard-earned cash. If you decide to opt with companies without taking the time to do your homework, it is almost inevitable that you are going to get burned from time to time – however, the careful analysis and belief in the products that you are backing could allow you to become a well-established investor that is well-rewarded because of the risks you took with a start-up business. Establishing a relationship with a well-founded investment company will help you avoid these pitfalls.


Of course, it can take time and practice for the trained eye to become active allowing you to decipher which company will be a success and which will be a flop. Unfortunately in this day and age, having a good product simply isn’t enough. Good management, financials and a plan for the future are the key ingredients for a future in which a business can thrive and grow – getting you the returns that you deserve.


At C.L. King & Associates, the Client’s success is our primary objective. Investment success in these volatile times can be fleeting for many, which is why our commitment to excellence in everything we do will be a constant regardless of the often turbulent world around us.

C.L. King & Associates is a full-service investment bank and self-clearing broker-dealer founded in 1972. We provide investment banking, equity research, sales and trading, and investor services to corporations and institutions.
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