PostHeaderIcon Trading in Penny Stocks

Aside from trading in major stocks that are listed in stock exchanges, there are also options available where the investor may be able to place his money on. One of them is penny stocks. These are stocks that usually trade under $5 a share, with some even as low as under a penny. Most companies who trade in penny stocks are those that are running on small capital and only require a few staff to run it.

What makes penny stocks so attractive is that they offer shares at very, very low prices. Who won’t be attracted to dealing stocks priced at under a dollar? For some people it really would be a very attractive deal. But along with lower share prices, penny stocks may offer quite a higher level of risk.

The reason for this is that most penny stocks come from newly-formed companies that have not yet established themselves. The risk comes from buying a stock from a company that may not yet be as stable. The risks of penny stocks going down in an instant are fairly common in a market that trades such stocks.

Because of the risks that penny stocks bring with them, most financial experts avoid dealing or recommending clients in putting some money on them. For most financial experts, it is not worth taking the risk. But because penny stocks offer quite dirt-cheap prices per share, some investors just cannot avoid the trying to gamble on some penny stocks in the market. And it is not all that bad, by the way.

There are some penny stocks that may offer the potential for rapid growth. Some small-cap companies may offer a very promising future that getting such penny stocks is an opportunity not worth missing on.

With "bargain" share prices, high growth potential and yet still higher risk for investment loss, how will one be able to survive and succeed in penny stock investing? One important tip that investors should remember is that the stock price does not really speak of the company’s business capability. There are some companies that deal in penny stocks simply because they think it is cheaper to do than going through an IPO.

Some companies may deal in penny stocks because they may not have a very convincing business plan that would warrant an investment banker’s funds for an IPO. This just goes to show every investor that behind every penny stock, there is a story behind why they are in the market. It is up to the investor to find out what this story is.

As with other major stock trading, extensive research on penny stocks is also very important. Investors should know what they are investing in. Before they put any money on a penny stock, they should first do their research and know the company better in terms of what they offer, how they plan to grow and gain revenue as well as what they aspire for in the future.

For the wise investor, starting out investing small in penny stocks may be the best move. Putting some money on penny stocks that will not damage your overall investment profile when the market goes down would be well be putting one in a good position. Penny stocks may be well worth the investment but it is not worth the risk in placing all your bets on it.


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