If you have a high tolerance for risk, then I feel it would be well worth gaining some exposure to the small cap side of the market.
Why invest in small cap shares?
This is because if you can find the next blue chip share when it is still only a small cap, you could be rewarded very handsomely.
You only need to look at global private hospital operator Ramsay Health Care Limited (ASX: RHC) to see why. Over the last couple of decades it has grown from being just a small time player to an industry juggernaut.
This has resulted in its share price climbing from 80 cents in 2000 to $80 in 2020. Those lucky investors that have held its shares over this period have generated incredible returns and continue to benefit greatly from its dividends today.
For example, in FY 2020 Ramsay is forecast to pay an estimated $1.58 per share dividend. This means that those investors that bought its shares in early 2000 are receiving a yield on cost of almost 200%.
This means that if you bought $50,000 worth of shares in 2000, in 2020 you would receive almost $100,000 in dividends. Now that is some passive income!
But which small caps should you take a look at?
I think that some of the most promising small cap shares at the moment are as follows:
Enterprise mobility software provider Bigtincan Holdings Ltd (ASX: BTH), online travel booking and expense management provider Serko Ltd (ASX: SKO), and intelligent workplace platform provider LiveTiles Ltd (ASX: LVT).
All three have massive market opportunities and strong product offerings, which could support rapid earnings growth over the next decade. But whether they have as much success as Ramsay, only time will tell.
