PostHeaderIcon Investing in Penny Stocks

Penny stocks are one of the riskiest stock investment vehicles in the market. Although they can be offers for under $5 per share with some even trading in mere cents, it won’t be such an attractive idea for most people to invest in.

One reason is that most penny stocks come from start-up companies that require a cheaper way to get additional capital than having an IPO. Another reason might be that some companies may not have established a more compelling business plan that made it more difficult for them to convince investment bankers from putting some capital on their upstart business.

But penny stocks are in no way, just a waste of investment. In fact, there are some legitimate and attractive businesses out there that offer penny stocks. The only problem is that it may be harder for the investor to look out for these promising companies in a haystack of penny stocks. But that is something that research may be able to determine.

Just like any type of investment, knowledge of a business or a company where the investor is putting up some money in is the key to making sure that the investment is safe. For investors in penny stocks, exhaustive research and study of the company and business profile of their prospects would be the first step of ensuring a safer investment. But the challenge that penny stock companies offer to investors is that such information may not be as available.

Since most penny stock companies are upstarts, company information may not be as readily available in the usual sources. It may take investors more time and creativity to be furnished with such information that will help guide them decide on investing or otherwise. The availability of company information alone may help provide investors with clues if such penny stock companies are worth investing in or not.

There are some penny stock companies that may be trying to hide something and therefore trying to limit access to company information. Investors should be wary of these things. They should opt for small-cap companies that readily provide essential company information for investors to look at. This would show that such a company is serious in trying to establish itself and has nothing to hide.

Another additional tip that investors should look at when planning to put some money on penny stocks is to try to look at its trading volume. The volume of stocks traded regularly should be consistent from day to day. Volume consistency is share trading is something that every investor should carefully look at and not just the high volume of shares being traded. Penny stocks that trade at an average of 20,000 shares daily might be a better choice than a penny stock that is traded for a million shares in a day and doesn’t trade the rest of the week.

Before investors plan to put a sizeable amount of investment in penny stocks, they should already have an exit plan in mind. Since penny stocks are in a very volatile market where the stock prices go up and down rather quickly, investors should have an idea in place on when they should sell their stocks for a substantial profit. One way this can be done is by setting a certain share selling price for their penny stocks. Once it reaches that price, it is time for investors to move on, sell and enjoy the profits. Sticking to this plan would ensure that investors have more control over their gains or losses in penny stocks.


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