Why not simply invest in a Micro Cap Mutual Fund

If you are attracted to penny or micro cap stocks, does it make sense to simply invest through a well-reputed mutual fund concentrating on this asset class? The answer depends on what kind of returns you are seeking: If you are seeking triple digit growth returns by aggressively picking winners in the micro cap stock universe, then no.
In a mutual fund, the chances of gaining hyper returns are greatly reduced by the fact that your investment will be spread over at least one hundred micro cap stock positions. Let us take for example one of the most reputed and oldest micro cap mutual fund, Royce Micro-Cap Fund (RYOTX). In the most recent decade it had its best year of 52% in 2003 and its ten year average annualized return is 10%. Not that these returns are anything to sneer at, yet they do not represent the kind of returns a penny stock investor seeks. Since most of the time this mutual fund holds anywhere from 150 to 200 stocks, the absolute micro cap stock winners returning 200 to 400% returns are buried in the average and dismal performance of the rest of the portfolio. Also, it does not seem realistic to perform the research and due diligence warranted by micro cap stocks.
Instead, the best way to invest in penny or micro cap stocks remains the route of online newsletters. The writers behind these small stock picks do their own technical and fundamental research upon which then they create a recommend list. They do not over-diversify themselves but instead concentrate on small stocks with the best potential for tremendous growth. Indeed, they often let their winners run and become over-concentrated so as to achieve the triple digit returns sought by penny stock investors. Additionally, the best of the newsletters frequently send out stock alerts when it is time to sell or take some profits. If you have not explored the world of penny stock newsletters, a good place to start is www.hypergrowthstock.com