People often ask me why do I invest mainly in small-caps. When I reply, “why not?” I get the following answers:
- Penny stocks are risky! I will only invest in the more stable blue chips (large caps)!
- Smaller companies cannot beat the MNCs!
- The small fries are first to get wiped out during a recession, interest rate hike, etc.
- Small-caps have poor liquidity! It’s so hard to get in and out because the spreads are so large!
- Too much corporate governance issues! What if there’s fraud? Look at ABC Ltd (Referring to an S-chip)!
While the above points are valid to a certain degree, it is because of such widespread negative reputation that small-caps have that allows considerable money-making opportunities to go unnoticed.
I believe that as an asset class, small cap is one of the most widely misunderstood and underinvested among investors. Here are the top 5 reasons why I believe small-caps ...
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