Are There Small Cap Stock Mutual Funds?

Mutual funds are collections of stocks and bonds and are owned by a group of people rather than an individual investor. This makes it more of an advantage since it allows investors to buy with less money than it would take to purchase the same amount on their own and it will spread the risks among a group of people.

The performance of any mutual fund will depend mainly on the efficiency of its fund manager who manage a portfolio of stock on behalf of investors. Making informed decisions, choosing a rated and well-performing fund manager is critical to your financially future in the green mutual funds market. Its critical you understand the basics of Mutual Funds Investing.

Its true that there really is no method or strategy invented in investing that’s completely safe without risks. Mutual funds, however have lower risks than many other investment options, that makes them attractive for those who lack the knowledge and skills in investment markets. Fact is, mutual funds have much better rates of return than the average savings account and the risks are minimal in this type of investment, compared to other riskier options.

There are basically three types of mutual funds with some variations on each.

• Money market funds. These funds are great for the long-term investor who have a slow and steady approach to investing that are better than leaving your money in interest-paying savings account.
• Equity funds that provide slow growth over time with some income along the way.
• Fixed income funds that are created to provide a current income over time. This is good for those who have retired or investors that are extremely conservative in nature.

In Summary: Diversify Your Small Cap Stocks With Mutual Funds

Diversification is one of the key ingredients of a healthy portfolio and energy mutual funds will help you get diversified in a broader way. If you are young and just beginning your career and in no real hurry for retirement, this is the one of the safest ways to invest your money for the long term. But with most mutual fund investing you do not have the high payoffs that many investors will seek to include for their retirement planning.

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Diversify Your Small Cap Stock Investments With Mutual Funds

Buy Small Cap Stock Companies That Have Money

Always buy a stock that is liquid, this means that it is a highly traded stock, this will enable you to easily buy and sell at the price you want without having a delay. You will also get a smaller spread, thats the difference between the BID and ASK price of the stock. For a stock to be considered highly liquid it should trade at least 500,000 shares per day, ideally even more.

Be Cautious With Small Cap Stocks

It is best to avoid stocks that are bellow $10 as this usually means the company is in trouble, although with the bear market of 2008 there have been a lot of good stocks at bargin prices between $5 and $10. Avoid buying a stock below $5 at anytime. Another consideration is options, does the stock has options?, this will be important if you want to trade options around your stock, such as a covered call, or you may want to buy a PUT option inorder to protect your stock. Be very cautious about buying a stock just before it’s earnings release, stocks often drop significantly if you come out with a poor report. Earnings releases are 4 times a year with one of them being the annual report. If you are going to trade options make sure that you learn how to trade by getting some good education. There are many swing trading strategies that work well with stocks in todays volatile markets.

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How To Buy Top Small Cap Stocks

Small Cap Stocks – Why Trade Online?

Today the most used method of trading is either using the telephone or stock trading online. When using the telephone to trade stocks you can still do it by speaking to a broker and giving them your clear instructions, or you can do it all yourself by using some form of menu system using the digital key pad. But by far the most common form of trading is done online, so what do you need to know about stock trading online?, more than you may think!

Small Cap Stock Trading Online – What Else To Consider?

1. Virtually every broker can do stock trading but what about options, Forex and futures?. While you may not be interested in trading either Forex, futures or bonds it is quite likely that at some time you will want to trade options online, even if it is just covered calls. Make sure that your chosen broker allows you to trade all the markets that you want to.

2. Of course the fee’s charged by your online broker is an obvious point to check, the fee’s can vary a lot and if you are doing hundreds or thousands of trades a year it can add up to quite a lot of cash. Did you know that you can just call up your online broker and ask for a reduced commission charge?, yes you can, I’ve done it. Of course they don’t advertise it but if you do a lot of trades they will want to keep your business.

3. Have you planned what you will do if you are in a trade and your internet connection goes down for any reason, it could be a power failure, problems with the internet or your PC crashing?. If you are day trading you will want to telephone your broker and manage your trade, probably you will just want to close it. How will your broker deal with your call, will they answer quickly, will they look at charts for you and describe what is going on?. Make sure that your broker has good telephone support.

4. Are your trading accounts safe?, make sure that your broker is a member of SIPC, the Securities Investor Protection Corporation, which protects against losses caused by the financial failure of the broker-dealer, but not against losses resulting from depreciation in a security’s value. Usually trading accounts are protected by the Securities Investor Protection Corporation (SIPC), up to $500,000 (including up to $100,000 for cash claims).

Whatever you decide to do, before trading stocks, options or anything else make sure that you get a good trading education by reading the best trading books that you can.

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Small Cap Stock Trading Online – What You Must Know

Do Research Before Buying Small Cap Stocks

Just by reading the balance sheet and other quaterly reports they release gives you a very poor insight into the real health of the company. Whereas the technical charts of the company tend to give the real picture of what the market thinks of the value of the company. In the case of Enron even simple technical analysis told you to SELL when the stock was in the $80-90 range, this is why technical analysis of stocks is so popular.

So what are the secrets to technical analysis?, I’m about to tell you, here are my golden rules:

* Only use 3-5 simple technical analysis indicators

* Make sure that you understand how the indicators that you have selected work, what the parameter settings are and in what market conditions they are effective

* After selecting your indicators and parameter settings don’t mess with them.

Technical Analysis Helps When Buying Small Cap Stocks

The real secret to technical analysis is to become VERY familiar with your choosen indicators, and really this can only be done by watching and studying the market, so that you get to the point that you TRUST them. The fact is that in any market, for each bar, there are only 5 pieces of information, the open, close, high, low and volume, yet there are now hundreds of indicators. Most of these indicators are displaying the same information and so are redundant.

For the record my set of indicators are:

* 4 Simple Moving Averages

* Bollinger Bands

* MACD

* Stochastics

But the way I use them is quite special, to learn more about how to become an expert at technical analysis visit:

Top Dog Trading Review

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Technical Analysis For Small Cap Stock Traders

The 4 Ways To Exit A Small Cap Stock Are

1. Trailing Stop – A price below the peak gain price where you will take profits if the stock reverses and starts to sell. The trail will follow the price up higher, but usually does not move down.You can also trail the price by either a percent below peak or close, or a point value below the low of a just completed bar on a chart.

2. Scale Out – Take the investment and scale out at fixed percent gain intervals. One example (especially for investing longer term), if you own a stock and get a gain of 25%, sell 1/4 of the position. Once the price rises to a 50% gain on the balance, sell half of what you have left. You have now locked in a 25% gain on your original purchase. The balance of the position should be locked in at breakeven – which means if it starts to go against you that means you will not let it go into a loss. On the balance of the shares, if it takes off strongly after a 50% gain, look to just exit the balance and move on to another trade. For intraday trading (day trading), you will want to scale out of half the position after a run of about 1/2%, and then move up your stop to breakeven on the balance.

3. Forever Investment – If you have a stock that you really think will be a winner for the long haul, once you get a 100% gain on it you should immediately sell 1/2. Why? Because once you sell 1/2, you have done a superb thing. You have retrieved your original investment out of it, all the money, and still have 50% working. Best of all, even if the company goes bankrupt, you cannot really lose. Ever. Take the 50% you gained out, and then try to find two different ideas that may do the same. The one thing to keep in mind here is there are only very very few Walmart, Home Depot’s, McDonalds etc. Even if you have locked in this part, be aware that tons of companies do superb for years, then the market changes and they bite the dust. It is super rare to find a new Proctor&Gamble or Microsoft. Most of the time you are better off to also have a “have to lock it in” price on the balance you hold, such as 200% gain etc.

4. Price Target – A fixed price from your entry price where you will exit if it gets hit. For example you might purchase a stock at 12, but be very happy if it went to 15 in a month or 2. So that is your exit. Price targets are entirely dependent on expected hold time and should grow the longer you plan to hold the stock (within reason). The thing to remember is you have to take what the stock will give you, not what your opinion of what you want the stock to do.Price targets can be made by looking at support and resistance as well.  In general, if the stock has to push a decent amount to your target, and your target you want is just beyond a resistance point, you should move the target down to underneath the resistance for a better chance of hitting it.

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4 Ways To Exit A Small Cap Stock