Investing in the stock market is an important part of the culture and history of the United States, and for good reason: over several 25 year periods, studies show that the median return from stocks was 11.4%, while the median return from bonds was only 4.3%. Today, one of the most popular avenues for this traditional financial practice is micro cap value investing, which refers to investments made in public companies with a market capitalization of anywhere from $50 million to $300 million. This obviously gives investors a significant number of options to choose from, but before you can begin investing, remember to follow a few basic tips to keep your finances safe. Read on to learn how to make smart, safe investments.
First, Do Your Research
With stock market research tools and stock research subscriptions making this step easier than ever, there is no excuse for not researching your stocks. Make sure you do this before you make a purchase, and don’t be afraid to dig: some investors even recommend calling the companies and speaking to the Investor Relations Department about their products, earnings and more.
Leave Your Emotions Out of Your Purchasing Decisions
You’ve read all of your stock research subscriptions and done some independent investigating; now you should come up with a plan and stick to it, your feelings about the stock aside. Once you buy micro cap equities, it is important to be patient and see how things proceed. However, you should also set an exit price and be ready to make a change before you lose your investment.
Microcap investing is a great way to improve your finances. However, it is important that you never put all of your eggs in one basket. Remember that balanced funds strive to keep anywhere from 50 to 60% of their holdings in stocks and the rest in interest-paying securities, such as bonds and convertibles. While this may seem like a limiting decision, it can also save you in the event of drastic changes in the market.
What tips for good investing have you heard? Share the good and the bad in the comments below!