Micro Management

A Mini Guide To Micro Cap Stocks Investment

Nir Dotan asked:

Stocks investment is not an easy subject, especially if you do not know what to look for. Stocks investment in micro capital stocks is even harder, because information about microcap companies – or penny stocks companies as they are often called – is not easily available whether in print or online on the internet.

However, micro cap Stocks investment can be learned, and can be a lucrative way of making money if you know the guidelines and stick to them. Here are a few that you should follow.

Rule number 1 – Do your homework.

Sometimes you will come across Stocks investment information that will catch your attention like a eureka moment. Don’t jump at making Stocks investment right away; make sure you do your homework first. Research everything you can about the company, especially about the stocks investments. Look for information about the people running the company.

Study how many stocks the company has on float in relation to the total number of outstanding stocks, and how many belong to the insiders. Look at the demand for the stocks. See how long the company has had the stocks on float and look at the trend – is the price steadily going up, is it flat, or is there a downwards trend?

Rule number 2 – Use a disciplined strategy when deciding on stocks investments; don’t involve your emotions.

Think of this as a game of strategy. After doing your homework and you find a stock you like, decide on a buying price and stick to it, no matter what.

It may happen that before you could buy the Stocks investment you want, the price shoots upwards or downwards even if there is no new significant news to influence the fluctuation. Don’t buy if the price shoots up, just because you think you might be missing out if you don’t buy it now. If the price zooms down, think twice and look at it as a signal to take extra caution. Don’t get carried way into buying just because you like the stock.

There are thousands of Stocks investment that may be more worthy than this one. If you cannot get this one, move on and look for something else. If you still want to buy the stock, wait until it stabilizes or goes back to your predetermined buy price.

Rule number 3 – Don’t wait for a perfect price.

Don’t look for a perfect price; there probably won’t be one. Study the historical price charts and decide on a bottom and ceiling range for your buy price. If the prices fluctuate, take the average.

After you have researched the company and you are sure the price will move upwards in the short term or long term, go ahead and buy it if it meets your price range.

Rule number 4 – Invest a smaller portion of your portfolio in micro cap stocks, and keep a bigger chunk for big cap stocks investments.

If you plan to build a portfolio of stocks investment, keep no more than a maximum of 50% of the total value of the portfolio to micro cap and penny stocks. If you can make big cap stocks a bigger chunk, that’s even better.

Big capital stocks are more stable, but may not earn as much as small caps. Small cap stocks have the potential to earn more, but they are riskier and will take up a lot of your time. A portfolio with a bigger percentage devoted to big cap stocks will be easier to manage and will cause you less stress.

Rule number 5 – Don’t get greedy; lock in your gains.

Now that you are getting the hang of stocks investment, don’t forget your disciplined strategy. Once you earn enough, lock them in with trailing stops these are stop loss orders to protect your profit and sell out while you still can.

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