Small companies present a big opportunity for investors, but they also come with risks. Olli Viitikko, Tuukka Kemppainen, and Juha Laakso offer advice to the Market Council on how to avoid common mistakes when investing in small companies. These experts believe that investing in small companies can lead to significant returns in the long term.
One common mistake when investing in small companies is not having the patience to weather market fluctuations. According to Olli Viitikko, a portfolio manager at Partners, even a single quarter can have a significant impact on small companies. He emphasizes the importance of being patient and avoiding impulsive decisions based on short-term market fluctuations.
Tuukka Kemppainen from Index Asset Management recommends diversifying investments to reduce risk and avoid relying on luck when investing in small companies. He notes that while small companies have historically outperformed large companies in the long run, the risks associated with them are higher than those of larger corporations.
Juha Laakso from Aktia advises investors to be prepared for bumps along the way when investing in small companies. He stresses the importance of considering your risk tolerance before making investment decisions. Additionally, he warns against expecting fast growth from small companies as it takes time for them to mature and become profitable.
Another current risk in the market that these experts advise investors to be aware of is high interest rates affecting small companies’ ability to borrow money. Small companies may struggle with their balance sheets and financing due to this factor.
Overall, these experts suggest that investors should approach investing in small companies with caution but also recognize their potential for significant returns in the long term if they are willing to take calculated risks and exercise patience during market fluctuations.
In summary, investing in small companies presents both opportunities and risks for investors. While they have better growth potential compared to larger corporations, they also come with higher risks associated with their smaller size and less established financial status. To avoid common mistakes when investing in small companies, investors should be patient, consider their risk tolerance carefully before making investment decisions, diversify their portfolio if necessary, and be aware of current market trends such as high interest rates’ impact on borrowing abilities.
