3 Risks of Investing in Microcaps

Three things you should keep in mind before investing in micro-cap companies. The first one is that information about those companies is not easily available. They generally don’t do investor calls, quarterly calls, and don’t publish detailed annual reports and news agencies also don’t cover such companies. often so even if the share price is falling and you try to figure out the reason for it you may or may not know the reason for the fall in price the next thing is liquidity generally micro-cap stocks are very illiquid and there may be a situation that they may be hitting continuous upper and downward circuits so any day.

if you want to exit that stock there may be a situation where it’s hitting lower circuits and you’re not able to exit the third risk would be corporate governance. generally, the micro-cap companies are not very strong in terms of corporate governance and promoter ethics and a lot of times their accounts are not very clean and since they are small companies, it is easy to manipulate and show fancy figures to the investors so you should keep these three things definitely in mind before you invest in a Micro-Caps company next time.

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