It is that time of year again where the shares of small companies tend to be the best performers in the stock market. But, what is an investor to do? Should I invest in small caps or throw caution to the wind and invest in penny stocks? Not all small caps are penny stocks but some penny stocks are small caps, considering that penny stocks are those trading $5 per share or below. Given the risk inherent in penny stocks, and the likely high returns available in small caps, it seems like small caps are the place to be.

Small caps are typically characterized by having market capitalizations of between $250 million and $2 billion. Few institutions play in this sector, but, unlike penny stocks, the stocks tend to trade in a more orderly fashion, despite sometimes being fraught with volatility. That volatitlity is nothing like the erratic trading and speculation in penny stocks, which by the liquidity issues alone are reasons to give investors pause. One of the main advantages of investing in small caps is that they have the capability to grow and at high rates, thus transforming themselves into into major companies. In addition, as the grow and grab market share, small caps are often takeover targets. Microsoft, which is one of the world’s largest companies wasn’t always the behemoth it is today. One of the benefits of investing (rather than trading) small caps is enjoying the substantial growth in market value, as growth and success occur. The likelihood that similar returns can be found in penny stocks is not nearly as great and the risk is higher, given the early stage nature of the companies. Another advantage you can enjoy when you invest on small caps is that mutual funds typicall do not invest in them until they reach certain trading levels or market value. This is an opportunity for investors to get in esrly and ride the wave when the big players begin to accumulate positions in the stocks, which means major price appreciation. The situation is different with even the best penny stocks. With less information available and the general risk associated with the trading and operations, success is not enjoyed by too many. Even if you hot a winner in penny stocks, investors find that there could be difficulty selling the stock, even if there is a big gain. Hence, the liquidity issue. When looking for some of today’s best investment opportunities it is not difficult for you to find a good small cap company or even a good penny stock play. Still, while the small capsmay be more expensive the small ones are not necessarily the way to go.
Small caps http://www.goldmanresearch.com offer good investment opportunities but you should avoid buying penny stocks http://www.goldmanresearch.com . The reason is that small cap companies have huge upside potential with less risk.