Why Cash is Your Best Asset with Penny Stocks |
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When you start your Penny stocks trading career you first need to decide how much you are willing to invest. You need to remember that this is not a "sure-fire" income opportunity and that it is possible that you may lose everything, so be sure to not to invest more than you can afford to lose. |
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hat said when you have decided on an monetary amount,
whether it is $100 or $10,000 you should avoid the temptation to put all
of it into one or more Penny stocks. But why you ask? Surely the whole
point of putting the money into your stock broking account in the first
place is to invest it. Well yes and no. . . if you have all of your funds invested
at the same time then you lose a lot in flexibility. You have few options
when faced with the need to respond to a rapidly rising market. Or to
profit form a newly acquired piece of information that one or more penny
stocks are about to move upwards. If you have invested all of you cash and your present
portfolio is flat, the only way to buy into rising penny stocks market and
get a piece of the action is to either. Use "your own money",
for example money that is not part of your penny stocks investment fund
(and is not money that you can afford to lose) a very bad idea. Or to get
on the phone to your broker and see if can sell some of your existing
shares so that you can buy into the rising penny stocks. The first is obviously not really a good thing to do and is
more akin to gambling than investment. After all if you couldn't make a
profit with the first group of penny stocks, why do think you could with
the second. A more likely scenario is that you are throwing good money
after bad, except that this time it is not money that you can afford to
lose. The second, though more sensible than the first, is not
really what trading penny stocks is all about. The whole point is to be
able to buy quickly if you think that a stock is about to rise. T sell
quickly, as well, when the market seems to have to have peaked for your
penny stocks, so that you can maximize your profit and sell before the
market starts to fall. If you keep a portion of your assets as liquid in your stock
broking account, then you have the flexibility to move quickly as the
market conditions dictate. A penny stocks trader without the ability to
move quickly is likely to be missing out on many lucrative trades. By
keeping around a third of your investment fund as cash allows you to buy
into a rising market without having to rush into selling any penny stocks
that may be under performing at that time. That way you get to benefit from the rising penny stocks but
can also hold onto the non performing or flat ones until they start to
rise or you have decided that you need to cut your loses and get rid of
them. Either way the point is that you are not rushed into a decision and
can decide based on research and rationality, rather than a need for quick
cash to fund your next investment. The ability to move quickly in response to rapidly rising
penny stocks can greatly affect your potential for profits in this most
volatile of the financial markets. Keeping a portion of your penny stocks
fund liquid will help you to achieve profitability and make the success of
your investing venture into the world of penny stocks trading more likely
to be a profitable one By: Buzz Scott
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