How much do you suggest investing into microcaps?

Question

100% of my investments are in a large spread of mutual funds
About 40% foreign/30% domestic/20% emerging/10% sector/industry specific.

I don't have any individual stocks and my experience is limited. I have one microcap (penny stock) that I am considering putting between $2-$3000 in.

I hope to be in for a longer term (not day trading).

If it did bottom out I would live, the gain is just too tempting.

Do you suggest staying away from microcaps all together or are they worth a most small percentage of your portfolio?

I have been getting great returns, I haven't gone into ETF's. I feel safer having pro's manage my $ and the expenses are bearable...besides the returns have been better than I could ever do on my own.

I was just wanting to get some experience with individual stocks and for such a small amount to invest I think micro/small caps would be good.

One problem is liquidity though....on a lot of small/micro caps I notice have way too much volume...don't want to be stuck on a sinking ship.

I know that 90% of new businesses fail (= $0), and 90% are short/distort pump and dumpers...but at the same time the super upstarts are right there too (microsoft was an overlooked one).... the question is if it worth the risk...

I'm young, I don't depend on this for income..but I would like a nice early retirement from it :)

Not a pinkie. To be perfectly honest with myself I don't think I have enough experience to handle a single micro stock as I am inexperienced in individual stock trading. While I am not a doom and gloomer whenever I see any red in my portfolio, I would hate to be stuck with a loser...statistically most micros are losers and without more experience or some secret information....it would be rolling the dice.

Think I better wuss out and stick to my funds until I get a little wiser.

(as for goog it scares me almost as much as a micro does since it is so pricyey and for me it would be such a concentrated investment and in my opinion it is way over valued)

It's all luck/speculation anyways....I really don't enjoy any of this.

I think I am going to just keep it on my watch list and put my $ back into

Answer 1

It depends, if it is a pink sheets stock, stay away, there is just too much fraud. Otherwise, just realize that with microcaps if you buy it you are married to it, possibly for life. They can get very illiquid and you may find yourself unable to sell out of the position for very long periods of time. I have seen one position take three months to close, selling everyday. Pick well, think of it like a marriage. You should do well if you pick well, put it away and forget about it for many years.

Answer 2

Personally, I would buy small caps but not micro caps. If you have mad money and want to spend the time researching/monitoring a micro stock, try it, if you don't mind the chance of losing the money. I like index funds the best for diversification and low expense ratios.
I went to a seminar one time and the guy teaching would take large positions in small cap stocks, he knew the stocks inside out, would visit the company, talk to corporate officers, and was patient, sometimes he would get a five bagger. You won't make crazy returns on a large cap. I picked a stock one time crdn, they make armor for the troops, and were not really discovered by Wall Street, I bought at like $12 and it kept going down to like $4, then it got coverage from Wall Street, a lot of orders from the military, and the stock went into like the $60s. If I had the guts and bought $3,000 when it was a $4, I could have made a nice return, but I sold early, you just never know, if for example, they are committing fraud, it could have just easily gone bankrupt. I had another small stock that just kept going down and down and never got up they got bought out but by that time they had lost like 99% of its value, when I sold I moved the stock down $2 on 500 shares, another risk with small caps, getting out of the position. Buying individual stocks are risky, and stressful, at least for me. Also, in general, I think the stock market game is rigged to favor CEOs, Investment Banks, and other insiders, small investors just get the crumbs at best and the shaft at worst.

Answer 3

A very small percentage. Sector funds are not for your core holdings.

BTW, in my opinion, you have way too much in international. I would not have more than 10% invested outside the US at this point in time. Yes, international has done spectacularly well over the last 3-4 years, but the easy money has been made and it's not reasonable to expect that kind of growth to continue. And you have 60% of your portfolio exposed.

Answer 4

If you are new to indiv stock (and even if you're not), I think penny stocks are a rip. There's plenty of action in the real stocks. My GOOG is up 60% this year.

Look at C - you don't need small cap in this stock mkt for volatility or profits.

You need to be day trading and on it 24/7 if you are going to dump money in those micros.

Answer 5

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Answer 6

90% of them are pump and dump scams.

Stay well away.

Cost me $16000 to figure that out.

My gift to you...no charge!

Answer 7

sure go for it. i do it myself. back in 2001 i bought DXPE at $1.09. it is now $47.50 a share.