Exchange-Traded Funds For Canadians For Dummies

Chapter 7

Small Growth: Sweet-Sounding Start-Ups

In This Chapter

Factoring small company stocks into your investment pie

Choosing the best options for your portfolio

Introducing micro caps

Once upon a time in the kingdom of Redmond, there was a young company called Microsoft. It was a very small company with very big ideas, and it grew and grew and grew. Its founder and its original investors became very, very rich and lived happily ever after.

Oh, you’ve heard that story? Then you understand the appeal of small growth companies. These are companies that typically have market capitalization (the market value of total outstanding stock) of about $300 million to $1 billion. They frequently boast a hot product or patent, often fall into the high-tech or, in Canada, mining arenas, and always seem to be on their way to stardom. Some of them make it, and along with them, their investors take a joy ride all the way to early retirement.

Unfortunately, for every Microsoft, there are a dozen, or two or three dozen, small companies that go belly up long before their prime. For every investor who gambles on a small company stock and takes early retirement, 100 others still drive their cars ...