There remains strong differentiation between penny stocks and small-cap stocks. Small-cap companies who are well-researched grow over a period of time to become large-cap stocks delivering higher returns over normal market-based returns, thus defeating inflation.

Small-caps stocks are considered high risk investments during their initial phase as they are clubbed with penny stock as their share price changes much dramatically leaving little room for investors to do changes in their investments.

It is imperative for investors to invest their hard-earned money into well-researched businesses who go through various business cycles during their life-span. Thus, returns given by these stocks are not consistent over short period of time. The average return by these small-cap stocks yields much higher than existing large caps invested and held over a period of time as purchase price is low.

Investment changes are required normally during businesses transformation long-term phases during which time moving investments from one stock to another become natural.