Small caps are the companies with small capitalization amounts.
They are also called Small Companies or Smaller Quoted Companies (SQCs).
This whole deal is very complicated, but you should remember that in layman's terms, it means nothing more than the size of a company.
To the common eyes of course, the size of a company could be the total number of employees working there, or simply the expanse of the plot of land that the company stands on.
Even the size of profits might be a considerable option.
But these are not true.
The size of a company is determined by the number of shares that it holds in the market.
Well, then the basic calculations pursue, and multiply the entire amount of stocks with the current price of each share in the market, and the resultant figure states the size of the company.
If the figure is low, the company is called Small Caps.
And their stocks in the market are called Small Stocks.
To understand what small cap stocks are, you also have to know the advantages involved.
The benefits of investing in Small Caps stocks are huge, and the big caps investors cannot touch or influence these profits at all.
There are two main reasons that assist in bringing about these benefits.
First, we have to know how the question 'what are the small caps stocks' is considered.
The small caps stocks are thought to be way too under-priced to be given any real attention.
The Wall Street analyst hardly provides any coverage to these stocks.
And thus the small caps are free from any interfering forces while finding the under-valued but highly potential 'superstar' companies where they are finally able to extort profits.
Secondly, the small caps are not included in the mutual funds and hence are of very little interest to the high flying profitable institutions.
Therefore, small caps without facing many hindrances and obstacles, can invest in potential small companies before they grow- an incident that could raise the trading and share prices to the ceiling.
Moreover, small caps have unmatched, huge growth potential.
When you look at those multi-million dollar industries, you know that they are at the end of the rope.
They have exhausted most of their options and energy and a slight jerk will throw them over the cliff.
But the small caps are still young, with huge reservoir of energy foaming within, and their options are churning out every single moment.
For them, at the bottom of the ladder, there is no way but to go up, while for the big corporate giants at the crown of the ladder there is no way to go but down.
Moreover, big industries already have their hands full of bureaucratic roadblocks which insist on never leaving, and thus they find it hard to make any quick changes.
But the small caps are better off in this aspect.
They are small, quick to the move, and are able to slither out of road jams and dead ends easily and smoothly.
They are also very sharp, since they constantly have to overcome hurdles as they make their way up to the top.
Therefore, they have to be idea- churning machines, constantly on the go.
Therefore, their profits double frequently.