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There is a direct correlation between the time of investment and the degree of risk and rate of return you can expect. Invest at the right time in the product cycle.
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A balance sheet with little to no debt is also a big plus. Look for relatively young companies with growing sales, yet is undervalued based on the company’s market potential versus its total market capitalization.
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But there are ways to minimize those risks without sacrificing potential profits. It’s impossible to take the risk completely out of small-cap investing. Others are chipmakers or cloud-computing companies that have plenty of promise but have been simply misunderstood by the market. Some small cap stocks are clinical-stage biotechs whose drugs have yet to be approved for commercial use. They also carry plenty of risk for investors.Īnytime you buy shares of a small, little-known company, there are a bevy of unknowns. The smaller companies often have the most potential for growth. Investing in small-cap stocks is a good way to earn huge returns.