Features of Small-cap Stocks

1. Market Capitalisation: Small-cap securities represent companies with smaller market capitalizations. The total valuation of these companies is less than that of large-cap and even mid-cap companies.

2. Growth Potential: Small-cap equities are often considered to have greater potential for growth than larger, more established companies. Such companies may be in their infancy, introducing innovative products or services, and have the potential to capture market share.

3. Volatility: Small-cap securities are typically more volatile than large-cap equities. Due to their relatively low trading volumes and sensitivity to market news, their prices are subject to significant fluctuations over short periods of time.

4. Risk and Reward: Small-cap securities have the potential for substantial returns, but they also carry greater risk. These businesses may have limited financial resources, making them prone to economic downturns and industry-specific problems.

5. Liquidity: Small-cap stocks may have lower trading volumes compared to larger equities, resulting in reduced liquidity. This could make it more difficult to purchase or sell shares without significantly affecting the stock price.

6. Diversification: Incorporating small-cap stocks into a portfolio can provide diversification advantages, as their performance may not always correlate with that of bigger-cap stocks or other types of assets.

It is essential to remember that investing in small-cap equities can be riskier than investing in larger, more established companies. Before investing in any stock category, including small-caps, you must conduct due diligence, conduct extensive research, and have a clear understanding of your risk tolerance.