Instead, many microcap stocks are traded on the so-called over-the-counter market, with the OTC Bulletin Board (OTCBB) a primary trading market for microcaps. Microcaps aren’t traded on the larger, more trusted stock market exchanges like the New York Stock Exchange or NASDAQ. What’s more, Microcap stocks differ from their larger stock counterparts in multiple ways. There are downside risks when investing in microcap stocks. With fewer eyes on the prize, a well-prepared microcap investor can capitalize on microcap stock opportunities that are ignored by other investors. That absence of interest in microcaps spells opportunity for category investors. Since microcaps are so small in stature in the financial markets, they don’t usually get that coverage, and bigger investors often ignore microcap stocks as a result.
Larger investors often rely on professional investment analyst reports and solid coverage of a company or fund by financial media outlets. Microcap stocks are often overlooked by bigger market investors, which leaves a larger, more fertile playing field for small company investors. Less Competition Equals Market Opportunity Tip: Microcap stocks may come with significant risk, so it's best to discuss any significant purchases of this category with a trusted money manager 2. When an investor is spending fewer dollars for a stock purchase, there’s a bigger opportunity for growth with a microcap stock investment.
Photo by Nikolay Pandev/E+ via Getty Images What Is a Microcap Stock?