| To answer this question we first need to understand | | | | coming in at as much as $5 per share. |
| what both of these types of stocks actually are. | | | | You can see then that a penny share is concerned |
| The 'cap' referred to in the micro cap stock example | | | | primarily with the value of each individual share. Penny |
| is short for capitalization. When people talk about a | | | | shares do not directly have anything to do with the |
| particular business they may talk about the market | | | | market capitalization of the company that holds them. |
| capitalization of it. This refers to the monetary value | | | | Micro cap stocks are different because these point |
| of the business. Anyone can work this out by finding | | | | to a company that has a relatively low value when it |
| out just two pieces of essential information - firstly | | | | comes to its place in the world. |
| the number of shares it has in total, and secondly the | | | | The one thing you need to think about with both |
| value of each of those shares. Multiplying them | | | | types of investment is how the company is geared |
| together will give you the market capitalization value. | | | | up to develop in the future. A micro cap company |
| So, micro cap stocks refer to a business which has a | | | | isn't likely to have much in the way of assets, |
| low market capitalization value. As such the shares | | | | particularly not when compared to a large cap |
| will tend to be priced quite low - sometimes less than | | | | company. It is very important not to get swayed by |
| a dollar - and the company and its shares won't make | | | | the fact that a company has millions of shares. It isn't |
| too many headlines as a result. | | | | just the number of shares it has, it is the amount |
| While many people haven't heard about micro cap | | | | they are worth which is relevant as well. |
| stocks, they will probably have heard about penny | | | | So think carefully if you want to invest money in |
| stocks before. As the name suggests, penny stocks | | | | either of these types of stock. They both have one |
| are cheap stocks that many times come in at under | | | | thing in common, and that is the fact that they are |
| a dollar in price per share. However they can be | | | | very risky. You could make big profits, but losses |
| priced higher than that; you might see a penny stock | | | | could also be on the cards. |