As Matt explained yesterday…
If you want all the upside potential of an early-stage startup investment…
With almost none of the drawbacks…
Then small-cap tech stocks are a fantastic option.
In fact, a major study from the University of Chicago found that small-caps outperformed large-caps by a huge margin, and could help you increase your portfolio returns by over 100%.
But trading these stocks doesn’t come without its challenges.
So today, I’ll share some of these challenges with you…
And then I’ll show you a secret we discovered for overcoming them.
Three Challenges to Small-Cap Investment Success
When investing in small-caps, you’ll face three big challenges…
Small-Cap Challenge #1 — Breakthrough Profit Opportunity?
Although their prices tend to be low, small-caps aren’t penny stocks.
Unlike most penny stocks, small-caps are real businesses, with real products and revenues.
The thing is, these companies are still early stage. They haven’t had their “breakthrough” moment yet.
So when you’re trying to identify a profitable small-cap investment, you need to make sure it has breakthrough potential — in other words, the ability to grow from a small enterprise, into a substantial business that could hand you a massive financial return.
Otherwise, the potential reward doesn’t justify the risk.
Small-Cap Challenge #2 — Priced to Perfection?
With small-caps, you’re getting in early, when a company’s stock price is still relatively low.
But a “low” stock price isn’t any good to you unless it can go UP, UP, UP.
In general, when we’re making a small-cap trade, we aim for opportunities that could hand us at least 10x our money.
These aren’t stable, blue-chip companies…
So if we’re going to take the extra risk of investing in them, we want to be sure we have the potential for extra profits, too.
Small-Cap Challenge #3 — Coming Catalyst?
Small-caps are publicly traded, so you can cash out of your position at any time.
But there’s still a big risk you need to be aware of here:
What if you invest in a small-cap when it’s trading at $5 per share — but then it just sits there at the same price? 3 months, 6 months, a year or more, and it’s still not moving.
Well, you can’t make any money if the stock isn’t moving.
And that’s why, generally speaking, you should only invest in a small-cap that has an upcoming “catalyst.” In other words, a specific, forthcoming event that could cause its stock price to rocket higher.
This event could be almost anything: the company’s quarterly earnings announcement, a new partnership, a product launch, anything. It doesn’t matter what the catalyst is… but if you want the chance to earn big, fast gains, make sure there is one!
One Simple Solution
These 3 challenges might seem like a lot to overcome.
But what if you could overcome all of them, with one simple move?
In other words, what if there were a simple way to ensure you were getting into:
- A high-quality small-cap company…
- At just the right price…
- And at just the right time?
Well, as you’ll see in Matt’s essay next Wednesday, we’ve discovered a way for you to do just that…
It’s all thanks to a tiny corner of the market that, until recently, few investors were focused on.
And now, not only is it set to explode…
But this time, you’ll have the chance to profit from it.
So stay tuned!