Three Simple Tips for Small-Cap Investing Success

If you want to make real money from the share market, it’s just as important that you adopt a sound strategy as it is to pick the right stocks.

And I won’t pull any punches here. If you want to make serious double and triple-digit percentage gains, you have to play in the small-cap sector. If you hug the blue chips, you’ll find gains like that are as rare as hen’s teeth.

However, some small-cap investors punt away aimlessly for years and end up without much to show for their efforts. I want you to avoid that trap.

There are punters out there…maybe you’re one of them…who buy small-cap stocks purely for the thrill of the risk.

There’s nothing wrong with that. Heck, you can make some good money taking that approach to the markets.

But if you play that game, you need to recognise that you’re acting more as a gambler than a speculator.

And what’s the point of winning a bet if you don’t understand how and why you won it?

The good news is that even the simplest strategy can help you make money more often than not in small-cap shares.

Stock speculation is a tough game at the best of times. But it’s even tougher when you’re flying blind.

If you’ve been an ‘aimless punter’, don’t despair. Today I’ll reveal three tips that will help you straighten up and fly right.

These principles guide my decision on whether or not to recommend speculative investments. You should consider and apply them whenever you’re pondering whether to buy or sell sharesin an emerging company.

Whether you’re a beginner or a veteran, I trust you’ll find these tips useful.

#1: Look for ‘Davids’ that could become ‘Goliaths’

When I look at a small-cap stock, I like to see a company taking the fight to the big boys.

There are many ways that little companies can profitably do that.

The best signs are when a firm is successfully innovating, penetrating or consolidating.

You should ask: does the company have a product that will shake up its market? Is it gaining market share at a rapid rate off a low base? Is it acquiring competitors on advantageous terms?

If so, you might have found a David on its way to becoming a Goliath.

The best gains — and the most exciting rides — come when you find a company at the start of that journey, not at the end.

It’s hard to get that timing right. But this leads me to my second tip…

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