Penny Stock Investing guide 101 |
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Penny stocks are also known small caps, micro caps and nano
caps. Penny stocks are low-priced issues that are often highly
speculative. Usually a penny stock sells for less than one dollar and is
highly volatile. Penny stock trading has its pros and cons. While the benefit is accruing of incredible profit minimum time period, the disadvantage is huge loss due to timely and often unwanted and unexpected fluctuation in the marke |
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. Therefore prior to investing in penny stocks there are
quite a few things that a trader should bear in mind. • To begin with the trader should at first examine the
share structure and distribution of the shares of a particular stock.
Doing this will help you in striking from your list of potential stocks
any that indicate a highly disproportionate number of shares held in a
single offshore account. For instance if you find millions of shares being
held for less than a penny in a single offshore account, you can assure
yourself that the moment you invest in the stock, heavy selling will
result. Also the moment the stock prices begin to rise, buyers will not
show any inclination towards purchasing and your shares will be rendered
good for nothing. So it is preferable that you opt a stock where
distribution points to a large number of holders. • A trader should always verify the status or legitimacy of
the company. The best way to do it is to contact the company. Most
companies list their main contact numbers. Don't hesitate in calling up
the company. Since it is quite possible that a false line is being
arranged for it, you should also contact the local operator and find
business listings for the officers of the company. In case there are no
listed numbers or local numbers to contact the company, drop the idea of
that company completely. This is because there is a great threat of
fraudulent companies hungry for your investment money. Also if the CEO
attends your phone call or the number is residential, means that company
is sham. • When a particular stock is in your mind, before making a
move further, take a look at the latest and long-term history of the stock
and the company. If the company's history is composed of reverse splits
and reverse mergers, its future is quite precarious. Find a company that
has a long and successful history. A company with a long time line can be
considered to provide you fruitful returns. • Before investing any amount, take a look at your
bankroll. Bankroll refers to the amount of money you can afford to spend
and lose. Since these investments are a risky affair, it is better that
pertaining to your bankroll; you calculate a certain sum, losing which,
will not trouble you much. Only if you can bear a big loss without
hassles, go for higher risk or gain investments, otherwise don't. • Since the penny stock companies often do not have
definitive revenue systems, measurable inventory levels, reliable
quarterly financials or even a definitive product, the worth of most penny
stocks can be skillfully assessed. As the stocks of these companies move
on speculation, the investor should use alternative research strategies to
know which stock will provide great potential in future and has high
degree of accuracy. By: Mansi Gupta
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