Micro-Caps: Are They Worth the Risk?

Greater growth prospects come with a greater chance of failure and setbacks. 

Emma Rapaport 24 August, 2021 | 14:47
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The post-COVID market downturn saw a wave of new and younger investors enter global equity markets. While the silent majority are remaining within the bounds of large, stable companies and broadly diversified funds, a vocal minority are trying their luck in the smallest, darkest ends of the market. Visit any Reddit board and you'll find investors discussing the prospects of small mining stocks or chasing short-lived momentum stocks.

While there's certainly nothing wrong with investing in micro-cap companies, the risks are real in one of the least researched segments of the market. The stocks are too small, new or speculative to be on the radar of most researchers. There are considerable challenges in understanding, monitoring and accounting for the risks these companies pose in the early stages of development.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Shopify Inc A1,415.69 USD-1.96Rating
Shopify Inc A1,790.36 CAD-2.07Rating

About Author

Emma Rapaport

Emma Rapaport  is editorial manager for Morningstar Australia. You can follow her on Twitter @rap_reports

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