Congrats! You’re Now a Small-Cap Grand Master

You did it! You’re finally at the end of your Extreme Small-Cap Profits email course.

This is Day 12 of 12.

By now you should know how to find small-cap gems in the market, how to assess their viability, and when you should hold on or sell, for huge profits.

We’ve gone from A–Z in finding, buying and selling small-cap stocks for massive gains.

But before I set you loose on the market, there’s one more important lesson I want to impart.

Traits you’ve got to shake

Albert Einstein once said only two things are infinite. The first is the universe. The second is man’s stupidity.

In the investing world, you could replace stupidity with irrationality and you’d hit the nail right on the head.

Too many times investors buy ‘hot’ stocks, only to end up disappointed.

They buy shares in businesses they know nothing about. They follow everyone else out of the market when it rips down, and pile in when it hits new highs.

Maybe no one has told them this, but buying high and selling low isn’t a winning strategy.

So why do so many investors do this?

Because these are natural traits we’ve developed over time. We want to stop pain as soon as it starts, and prolong euphoric highs.

We’ve had these traits for hundreds of thousands of years. And for the most part, these traits have been imperative to our survival.

But they’ve also been of detriment to many investors all over the world. You cannot beat the market if you simply follow it.

You need to be a contrarian. You need to buy the stocks no one is willing to buy. You’ve got to sell out when everyone else wants more.

You’ve got to think differently.

Don’t get starry eyed

It’s easy to get caught up in it all.

Growing industries.

The new ‘hot’ trend.

Investors flock to where they believe the best returns are. And so do businesses.

But many times this is just a trap. Most companies that are trading at extremely high valuations are terrible investments.

Investors that pile in because they’ve seen or heard so many others made money on the stocks are crazy. But they think, why shouldn’t I be able to do the same?

The crypto trend in 2017 comes to mind. 

At its high, a single bitcoin cost you more than US$19,000. Those who bought in at the top are still waiting to see any gains on their investment.

Or what about the blockchain investments in the same year?

Along with cryptos, anything crypto related skyrocketed in 2017. One company that changed their name to include blockchain rocketed 500% that morning.

Bloomberg wrote late last year:

The re-named firm joins the ranks of recently christened crypto companies — a list that includes former makers of juice, sports bras and sofas — whose share prices have all rocketed after their respective announcements. Some are likening the mania to the dot-com boom, and ultimate bust, two decades ago.

Those investors who were looking for further gains lost almost 60% of their money on the stock.

Money Morning 30-04-18

Source: Google Finance

[Click to open new window]

This is not to say you shouldn’t invest in rising assets, or that bitcoin and blockchain companies are a passing fad.

But before jumping onto what the masses have already bought, look for substance and know what you’re buying.

Don’t just buy because you want the same returns everyone else is making.

Buy because you’re certain your investment could increase in value over time.

Only the brave venture here

If you recall in Friday’s email, I wrote about a massive opportunity almost no one is talking about — China.

The only thing the mainstream is saying about China is that it’s a bomb. They fuss over the debt of the country and the strict laws.

But as soon as stocks start to rise, you can bet they’ll be telling investors to start piling in. As I said, this is the worst time to jump into an investment.

What you want to do is be the first one in there. That way, when everyone else realises the opportunity, you just have to sit back and watch your holdings rise higher.

And if you buy into the right small-caps, gains could be enormous.

But not everyone can do this. They find it hard to buy what no one wants to. They’d rather pile into inflated stocks because it’s easy to justify.

If asked why they bought a particular stock, all they say is: ‘because that sucker keeps going up.’ Yet it only goes up until it doesn’t.

Only the brave venture here.

You’re now a small-cap Grand Master

Well done!

You’ve just learnt everything you need to know to become a small-cap Grand Master. You’ve graduated from this course with flying colours.

As you’ve seen, there are no formulas or tricks to investing in small-caps. All you need to do is search for lucrative companies and be able to assess them objectively.

Again, I’d like to thank you for sticking with it throughout these 12 days and being a dedicated reader of Money Morning. I hope it was as enjoyable for you as it was for me.

Now, go make your fortune!


Härje Ronngard,
Editor, Money Morning

Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Port Phillip Publishing, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.

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