Rekindling motivations to explore Hidden Gems on the ASX

As the saving returns further tumble down, and the market appears to be struggling against the health calamity, your investment aspirations walks defeated on the dreary path of despair. While the sombre ambience clouding the investment market and the fear regarding the risky securities is enough to send the roaring ambitions to a deep slumber, a slight wakeup call can be a potential source for unburying ASX hidden gems. The top micro-cap shares not yet flashing in the glistening zone of many investors can be your prospective saviour, providing you hope to skyrocket your investment returns.

Coronavirus like a fiery dragon has leashed havoc on the stock market where most of the sectors are plagued by the growing uncertainty encompassing the market. Although the depressive thoughts currently torment your 2020 aspirations, the glimmer of hope can give a right nudge to your investment moves, probably helping you to reap out a handsome sum in a couple of months or years. The micro-cap shares in this respect are often keenly regarded to provide a strong impetus to the investment returns.

Micro-cap companies, despite their relatively lower scale of operation, have not only survived but also triumphantly risen in the past couple of months. S&P/ASX Emerging Companies Index surged by over 330 points in the year 2019 signifying the growth of 27.6%. The acceptability of the newer business due to the digitalised trends and the expanding opportunity in the international market have bolstered the growth of the micro capitalised companies.

Source: ASX

The ambitious investors who are looking for some vehicles providing sturdy income in the wink of an eye often place their bets on the micro-cap stocks. Placed at somewhat bottom of the capitalisation hierarchy, micro-caps have the market capitalisation between 50 million to 300 million. While the hefty returns tend to lure some investors, many shy away owing to the risky nature of the shares. Although your underlying predisposition is an extremely crucial moderator of the investment, the other elements should not be overlooked when making any decision related to the investment in micro-cap stocks.

Risk and Return comes in a package

Many individuals who seem to regard the stock market as a battleground, thereby aggressively look for the stocks that would give them huge returns despite the risk involved. In the similar side of the same world, there lies risk-averse people having phobic sentiments against the risky assets. Contemplating on the contradicting psychology, as you find yourself in huge investment dilemma, the conflicting yet amalgamated combination of the risk and return should not be forgotten.

The micro-cap companies have enormous growth potentials that can send the shareholder’s wealth skyrocketing in a short amount of time. The broad acceptance of new solutions presents a massive opportunity for smaller organisations to acknowledge accelerated pace in the coming years. In the past few years, many smaller-scaled organisations have quickly achieved sudden growth owing to the right implementation of the ideas in the proper manner. The plethora of prospects accompanying the micro-cap stocks often creates a hallow-effect, thereby increasing their lucrativeness.

Similar to the growth potential, the micro-caps are also ridden with the risk that hovers over the stock’s performance. Often the company’s insufficient ability to command funds and absence of strong financial backing may expose it to the varying threats. The risk is further intensified due to the lack of readily available public information. The low degree of liquidity associated with such stocks increases the bid-ask spread, often creating complications for the shareholder for profitably selling the shares in time.

The real-world performance is the lens to understand forthcoming potential

Rather than the thud of the heartbeat, the investments decision should be sourced through the rational cognitive thoughts that utilise the real data and figures to predict the prospects. The wisdom would suggest analysing the fundamental performance as over the long-term, the stock movement prominently depends upon the company’s operations, revenue and profit trends and the other major corporate decisions.

While you do not have the crystal ball to put forward a prophecy, the real-world performance stats definitely are the glasses that can help you to predict the future performance of the micro-cap stocks.

Both price and volume are of grave importance in predicting the overall performance. Often the two elements are integrated to the actual performance of the company. The positive trend backed by the strong momentum is a messenger of upcoming glad tidings. The robust push in terms of volume highlights, that wise investors have started to show interest in a particular stock. Furthermore, as the high volatility is associated to the micro-cap stocks, the price trend tends to play a very crucial role, which cannot be ignored.

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