How risky are small-cap stocks?

Question

How risky are small-cap stocks?

Answer 1

Pink sheet listed companies are risky investments since they don't have to file quarterly or annual reports with the SEC. These companies fail to meet the minimal requirements of even the Bulletin Board. There are nearly 4,000 companies listed on the pink sheets – some of which are legit, some of which aren't. If you want to hold on to your money – do some digging – though with some of these companies you may not get far. Use research tools like BeaconEquity.com to read info obtained directly from the company.

NASDAQ's OTC Bulletin Board companies are a less-risky investment, as they must fulfill certain requirements. Companies listed after 1999 are required to report current financial information to the SEC, banking or insurance regulators to meet eligibility requirements. Securities listed on the OTCBB are recommended far more so than pink sheets.

Answer 2

Small cap companies are very very risky to invest in.Never invest in individual small cap stocks unless you can spread the risk by picking up at least 10 different stocks. The easiest and efficient way to get some small cap exposure is to invest via a small cap mutual fund or ETF.

Those professional money managers have excellent access to information on small caps and they can manage your money better than you would, if you want to invest in small caps. Hope this helps.