The world of investing is daunting, especially if you have no idea how investment works. People naturally want to get the most out of their hard-earned money, which is why investing is a popular option for people of all backgrounds and classes. There are always a few things you should keep in mind when thinking about investment strategies. First, it’s advisable to strike a balance in the kinds of investments you choose. It’s not a good idea, for example, to invest all of your holdings into stocks.
As the saying goes, you shouldn’t put your eggs in one basket — especially if they’re golden eggs.
As such, a solid financial strategy is to invest 50 to 60% of your holdings in stocks and invest the rest in securities such as bonds and convertibles — investments that yield quite a bit with high interest rates. Long-term funds such as bonds and convertibles can generate up to 80% of the return while at the same time incur 40% less volatility than short-term funds.
When it comes to stocks, it’s only natural to flock toward big names like Microsoft, Hilberton, and IBM. However, in today’s world of start-ups and micro-investing, there’s seemingly no limit to the lesser-known but just as promising publicly-traded companies in the country. In general, micro cap investing is considered a good option for investors who don’t have the capital to securely invest in larger companies like Google.
What is micro cap investing? Micro cap (or microcap) investing simply refers to investing in companies that have a market capitalization of $50 million to $300 million. These companies have done quite well over the years — well, make that decades. From 1926 to 2001, micro cap stocks have an average return of 12.27%, a stellar number! Stock market research tools are often used by stockbrokers and financial experts to best tap into the U.S. micro cap equities market.