Module 8 ยท Building a Portfolio and Managing Risk
Smaller companies can grow faster, but they carry liquidity, governance and volatility risks.
Mid and small-cap stocks can offer higher growth potential, but they are riskier: less liquidity, higher volatility, and sometimes weaker governance.
A small company is more vulnerable to a single product, customer or manager. Its share price can swing far more than a large-cap's.
If you invest in smaller companies, do more due diligence, keep positions small, and understand that 'emerging' does not mean 'safe'.
Example: Dixon Technologies
Dixon has grown fast on the back of electronics manufacturing, but it carries customer concentration and thin margins. A small position with thorough research is the disciplined approach.
Compared with large-caps, small-caps generally have:
Why might a small company be more vulnerable to a single customer or manager?