Should You Consider Investing In Penny Stocks?
Companies / Investing 2015 Sep 09, 2015 - 03:42 PM GMTBy: Boris_Dzhingarov
Penny stock investments are so popular among new investors because of the huge success stories that appeared in the past with companies like Apple or Google. When these companies opened to the public, the shares were really cheap. For instance, one Apple share was $22 in 1980. As time passed, these companies ended up making a lot of money for those that invested. Unfortunately, something like this rarely happens.
Penny stock investments are basically connected with companies traded on pink sheets. These are firms that do not actually qualify for the major index trading. Because of this, the firms do not have to release information about their earnings or even about the financial business plans that they use. The bottom line with these penny stocks is that you do not know much about what you invest in. many serious investors just see this as being gambling.
Although not actually recommended, in the event that your investment budget is low and you want to invest in the penny stocks, here are some facts that you will want to consider.
Use Capital That Is Only Dedicated Towards Penny Stocks
Whenever selling and buying these stocks, you have to use just a part of the capital you have. Consider this as being a portfolio that is dedicated towards high risk investments. The rest that remains should be directed towards long term investments that are proven to bring in a good return.
Never Diversify The Portfolio
In order to achieve long term success, the investor is taught to diversify its portfolio. When looking at penny stocks, this is not a good idea. When you invest in many penny stocks at the same time, your risks are drastically increased since they do end up imploding in most cases. You do not want to have too many implode on you at the same time.
The Low Volume Problem
When you buy the shares of a really well-known major indexed company, the order is filled at exit and entry points in an immediate manner. That does not happen with many of the penny stocks. Because of a low volume available, you may end up not being able to get out when you actually want to do this or you may not even be able to get in when you want to. Do try to consider those penny stocks that offer some sort of fair trade volume.
Never Be Greedy
When investing in penny stock it is more important than ever to have a really good exit strategy and properly set the profit targets. A blue chip stock will bring in weekly, yearly or monthly trends. The penny stocks can so easily end up busting or booming in just one day. In the event that you achieved success with a penny stock and you see that there is a fizzle that appears, the best thing that you can do is get out and look for another opportunity.
The last thing that we should analyze is that it is really important that you take the necessary time to research as much information as possible about the company that you want to invest in. information will be limited but whatever you manage to find is great and has to be taken into account so that you can actually give yourself a chance of success.
By Boris Dzhingarov
© 2015 Copyright Boris Dzhingarov - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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