{"id":4760,"date":"2022-10-28T13:52:00","date_gmt":"2022-10-28T03:22:00","guid":{"rendered":"https:\/\/strawman.com\/blog\/?p=4760"},"modified":"2022-10-28T13:52:17","modified_gmt":"2022-10-28T03:22:17","slug":"the-risk-of-small-cap-investing","status":"publish","type":"post","link":"https:\/\/strawman.com\/blog\/the-risk-of-small-cap-investing\/","title":{"rendered":"The &#8216;Risk&#8217; Of Small-Cap Investing"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Here at Strawman, we like to poke around the lesser known corners of the market. And why not? There are lots of hidden gems to be found.<\/p>\n\n\n\n<p>In fact, there&#8217;s plenty of things to like about so-call &#8216;small cap&#8217; stocks.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>More growth potential<\/li><li>Less competition from other investors<\/li><li>Less rational pricing (more opportunity to find significant mis-pricings)<\/li><li>Better access to management<\/li><\/ul>\n\n\n\n<p> The compromise we accept, however, is that this area of the market tends to be &#8216;riskier&#8217;. Or so we&#8217;re told.<\/p>\n\n\n\n<p>If, like some, you define risk as share price volatility, then there&#8217;s some truth to that. At least on a day to day basis. Nevertheless, does that mean that big &#8216;blue-chip&#8217; stocks are immune to wild swings in price?&nbsp;<\/p>\n\n\n\n<p><strong>Facebook<\/strong> (NASDAQ:FB) &#8212; one of the largest companies in the world &#8212; is down 70% over the past year, and last week lost <em><strong>one quarter<\/strong><\/em> of its value in one single session!\n\n<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img fetchpriority=\"high\" decoding=\"async\" width=\"424\" height=\"227\" src=\"https:\/\/strawman.com\/blog\/wp-content\/uploads\/2022\/10\/meta.png\" alt=\"\" class=\"wp-image-4762\" srcset=\"https:\/\/strawman.com\/blog\/wp-content\/uploads\/2022\/10\/meta.png 424w, https:\/\/strawman.com\/blog\/wp-content\/uploads\/2022\/10\/meta-300x161.png 300w, https:\/\/strawman.com\/blog\/wp-content\/uploads\/2022\/10\/meta-45x24.png 45w\" sizes=\"(max-width: 424px) 100vw, 424px\" \/><\/figure><\/div>\n\n\n\n<p>\n\nEven if you want to avoid tech, and focus only on the bluest of blue chip Aussie stocks, you&#8217;ll find plenty of &#8216;risk&#8217;.<\/p>\n\n\n\n<p><strong>Woolworths <\/strong>(ASX:WOW) is down 20% over the last year. <strong>Wesfarmers <\/strong>(ASX:WES) is down 27% from its January high. Alas, even the almighty banks have been far from a &#8216;safe&#8217; long-term bet &#8212;&nbsp;<strong>ANZ<\/strong> (ASX:ANZ) shares are <strong>down 30%<\/strong> from where they were at the start of 2015. Not even seven years worth of dividends are enough to make you whole.<\/p>\n\n\n\n<p>The point here is not to selectively rag on some of the ASX&#8217;s golden geese, but rather to point out that bigger isn&#8217;t necessarily better. And that share price volatility is a stupid measure of risk.<\/p>\n\n\n\n<p>Uncle Warren, as usual, defines it best:\n\n<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img decoding=\"async\" width=\"726\" height=\"352\" src=\"https:\/\/strawman.com\/blog\/wp-content\/uploads\/2022\/10\/buffett.png\" alt=\"\" class=\"wp-image-4763\" srcset=\"https:\/\/strawman.com\/blog\/wp-content\/uploads\/2022\/10\/buffett.png 726w, https:\/\/strawman.com\/blog\/wp-content\/uploads\/2022\/10\/buffett-300x145.png 300w, https:\/\/strawman.com\/blog\/wp-content\/uploads\/2022\/10\/buffett-670x325.png 670w, https:\/\/strawman.com\/blog\/wp-content\/uploads\/2022\/10\/buffett-45x22.png 45w\" sizes=\"(max-width: 726px) 100vw, 726px\" \/><\/figure><\/div>\n\n\n\n<p>\n\nIndeed, if you think about it, we should welcome share price volatility with open arms. It offers us the opportunity to buy shares at very attractive prices.<\/p>\n\n\n\n<p>The more volatile the better.<\/p>\n\n\n\n<p>Not everyone will agree. And very few can muster with the (significant) emotional fortitude &#8212; and patience &#8212; required to take advantage of sudden and significant price swings.<\/p>\n\n\n\n<p>But that&#8217;s exactly why the smaller end of the market offers such rich pickings for those who can.<\/p>\n\n\n\n<p>Good hunting.<br><\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p class=\"has-text-color has-text-align-center has-cyan-bluish-gray-color\">\u00a9 2022 Strawman Pty Ltd. All rights reserved.<\/p>\n\n\n\n<p class=\"has-text-align-center\">| <a href=\"https:\/\/strawman.com\/member\/landing\/privacy\">Privacy Policy<\/a>&nbsp;|&nbsp;<a href=\"https:\/\/strawman.com\/member\/landing\/terms\">Terms of Service<\/a> | <\/p>\n\n\n\n<p class=\"has-text-color has-text-align-center has-cyan-bluish-gray-color\">ACN: 610 908 211 <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Here at Strawman, we like to poke around the lesser known corners of the market. And why not? There are lots of hidden gems to be found. In fact, there&#8217;s plenty of things to like about so-call &#8216;small cap&#8217; stocks. More growth potential Less competition from other investors Less rational pricing (more opportunity to find significant mis-pricings) Better access to [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":4764,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4760","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The &#039;Risk&#039; Of Small-Cap Investing - Strawman Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/strawman.com\/blog\/the-risk-of-small-cap-investing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The &#039;Risk&#039; Of Small-Cap Investing - Strawman Blog\" \/>\n<meta property=\"og:description\" content=\"Here at Strawman, we like to poke around the lesser known corners of the market. And why not? There are lots of hidden gems to be found. In fact, there&#8217;s plenty of things to like about so-call &#8216;small cap&#8217; stocks. 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