Small Cap in Focus: Dialight

Investors too often equate share price volatility with risk and dismiss small cap shares for being too 'risky'. But few equate upside volatility with risk

Todd Wenning 5 December, 2013 | 1:00PM

This article is part of Todd's monthly series "Seeking Small Caps With Moats." The introductory article can be found here.

If you’re an investor that stresses over daily share price fluctuations, small cap shares are probably not for you. There’s nothing wrong with that - know thyself, after all - but a common mistake investors make is to equate share price volatility with risk and dismiss small cap shares for being too “risky”. Bear in mind that though share price volatility works both ways, curiously, few equate upside volatility with risk.

A much better definition of investing risk is the permanent loss of capital. Indeed, the risk of losing a substantial amount of your capital is what really keeps investors up at night. Investors can reduce the incidence of permanent losses of capital by figuring out what a company is worth and then paying a lot less.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Dialight PLC303.00 GBX0.17

About Author

Todd Wenning

Todd Wenning  is an equities analyst with Morningstar.

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