hello sir… i want to invest in invest in small caps…how to find good small caps?
Hi Shivam. Investing in small caps is not much different than mid or large caps.
A few essential points that you need to check in small-cap stocks before investing are its liquidity, debt level, promote‚Äôs share, pledging, management‚Äôs background, and efficiency.
You can use screener website to find the small-cap companies to research. Run a simple query of (market cap < 500) and it will give you the list of small cap companies. Then study them further to find good ones to invest. Here’s a video on how you can find stocks to invest:
I hope it helps. Cheers!!
While chalking out their stock investment plans in India, many investors perceive small-cap stocks as the right investment avenues. Here are some tips that may help you select the best ones:
1. Check past performance records
Investors should buy stocks only from those companies that have a track record of successful shares over five years. Also, the consistency of stock performance over this period should be a major determinant while deciding what stocks to buy.
2. Study the market size
, investors should purchase stocks from a small-cap company whose market size is large. If an industry is very promising and has scope to earn huge profits in the future, the stock returns of companies belonging to this domain are also likely to be high. The company’s dedication towards contributing to this industry is another crucial factor to consider.
3. Calculate the bid-ask spread
ensure that the bid-ask spread of your small-cap investment does not exceed 10 paise at any rate. If the bid-ask spread exceeds this upper-limit, investment risks increase and you might be treading an unsteady ground.
Hope this helps!