When investing in the stock market, for years I’ve favored small-caps, penny stocks and even micro-cap stocks over big-cap stocks. Why?
“The proof is in the pudding,” as they say. Big company stocks tend to move up and down with the general stock market. Small company stocks can see their stock prices immediately affected by changes in management, marketing practices, and new product development and discoveries. Big companies, with so many divisions, cannot benefit as quickly from the changes listed above.
It’s been 10 long years for investors and, I’m sorry to report, investors in big company stocks have not fared well at all. Below, please find the closing level of the Dow Jones Industrial Average on December 31 for every year going back to 2000:
December 31 Dow Jones Industrial Average
2000 10,786
2001 10,021
2002 8,341
2003 10,453
2004 10,783
2005 10,717
2006 12,463
2007 13,264
2008 8,776
2009 10,428
2010 11,491 (Dec. 20/10)
The reality is that, if an investor had bought a basket of the Dow Jones Industrial stocks in 2000, he or she would only be up 6.5% in 10 years! The dividends these big company stocks paid each year hardly kept up with inflation.
Comparatively, the Russell 2000 Index of small-cap stocks is up about 100% over the past 10 years.
I monitor the action of the big market index every day here in PROFIT CONFIDENTIAL to establish the market direction, which is of utmost importance to all stock sectors.
But when it comes to investing in individual stocks, the real money in investing is in small-caps, penny stocks, and micro-cap stocks. Unlike the big-cap stocks, there are over a hundred examples of small company stocks I can give my readers that are trading today at 10 times what they traded in 2000. And that’s why I would never invest in big-cap stocks; they simply don’t have the profit potential of small company stocks.
Ask yourself, will companies like Microsoft, Wal-Mart, GE, IBM or American Express double in size in the next five years? No. But there are hundreds upon hundreds of small companies that will.
(Just as an FYI, there is not one major gold producer I could even classify as a big-cap stock. Newmont Mines (NYSE/NEM), the grand-daddy of big gold mining companies, has total market value of $29.0 billion. The majority of the 30 stocks that compromise the Dow Jones Industrial Average have market caps in excess of $100 billion.)
read more on:
http://www.profitconfidential.com/todays-profit-confidential/the-last-10-years-why-these-stocks-have-always-done-best/
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