Small Cap Mutual Funds and Micro Cap Mutual Funds
Is there really some thing called as micro cap mutual funds and stocks? Well. You would not believe there is a classification even smaller called as nano cap stocks. Any ways, micro caps have a market capitalization in the range of $ 50 million to $ 300 million.
Similar to that of small cap mutual funds micro cap mutual funds are not allowed to invest in their respective stock market beyond certain limit. Typically micro cap mutual funds invest about 80% in very small stock companies. The funds will have to generally hold between 70 % and 80 % of their net assets in equities (Gartmore Micro Cap Equity Fund). Normally the risks are high and costs are also high very similar to small cap mutual funds.
Is It Advisable To Invest In Small Cap Mutual Funds?
The answer to this question depends on the premise that if quick gains is what you look for and you are not scared of risk of loss, yes you can invest in these funds provided you stay invested for shorter runs of time. Another major consideration that you should answer is whether you are investing in small and micro cap mutual funds alone or do you have a well diversified portfolio in place. There are some fantastic statistics in favor of small and micro cap mutual funds. Even the best known small cap mutual funds have to give in to market forces. A Slight shake could bring down the market and the mutual funds even if it is all on a sudden. Did you here some one say small cap mutual funds tie hands at SEC in order to buy large portions of issuers' outstanding shares and in the process artificially inflate price!
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