Is it Worth it to Invest in Penny Stocks?
Penny stocks many times are great entry point into the stock market. Starting with smaller investments while you get your footing and learn can make the most sense. Many traders end up not only starting with penny stocks, but they become great penny stock traders making them some significant money. Penny stocks are a good place to start because they are cheap ranging from .0001 to $5.00.
Many investors find penny stocks very risky business for a few reasons. One reason is that the company is not required to share all numbers with the public and sometimes do anything to keep their business running. They might have a great business plan, great product and great marketing, but they lack in funding. Therefore, they can dilute shares looking to raise capital. That is not the case with all companies and it would not be fail to lump all penny stocks in this category. What is the truth is that with proper research and educations penny stock trading can be quite lucrative when traded when using your brains, and great tools and resources.
Trading penny stocks is very attractive and simple because your main focus is buying low and selling higher. You can ride the wave, the business cycle, market trends, news releases and make money even if the company doesn't.
And let's not be too quick to judge penny stocks because we have to keep in mind that all companies have to start somewhere. Many companies that are successful now once began on the OTCBB exchange. It is advised to do your homework because there are scams. Companies can promote themselves using marketing or e-newsletters for company releases, news releases or anything to spike investor interest and drive up the price of the stocks. This causes the shares to be diluted.
As they sell new shares into the float, the price doesn't drop giving them maximum price for their diluted shares. To finish the scam, the companies will usually let interest in the stock to quiet down a bit and then they will file to reverse merger. This just means they cut down the amount of shares in the float. In larger companies this is a good thing but with penny stocks this just starts the process of dilution all over again. Many times this can be a last ditch effort to bring in money when a company just can't do it on its own.
Another scam is the "pump and dump." The price is driven higher and higher through promotions, chat boards, e-newsletters, website promos, etc. The penny stock rises and then very suddenly, they are "dumped" leaving shareholders with a big loss. The penny stock crashes. Believe it or not, if you can monitor these promotions and see patterns, you can get in as it is rising. Make sure to get out before it dumps or you will have a big loss.
Even with the skepticism and risk surrounding the best penny stocks, they can still be great and rewarding investments. The more informed about the market trends and promotions out there, the better decisions you will make. Make sure you research and look to penny stock websites that offer great resources and tools in aiding your own growth and trading development. Start with a top 100 list of penny stocks where you can see a company's quote, charts, history and news. This will give you more insight into a company's success and stability and where they are headed.
Just keep you head on your shoulders. Expect to make mistakes. You will win some, and you will lose some. With this, the sky is the limit in potential after proper due diligence. Some penny stocks can rise to 100% or even a 1000% at any given time. As one person loses another gains, just be careful you are on the winning end. Be smart, do your homework and have fun!
Many investors find penny stocks very risky business for a few reasons. One reason is that the company is not required to share all numbers with the public and sometimes do anything to keep their business running. They might have a great business plan, great product and great marketing, but they lack in funding. Therefore, they can dilute shares looking to raise capital. That is not the case with all companies and it would not be fail to lump all penny stocks in this category. What is the truth is that with proper research and educations penny stock trading can be quite lucrative when traded when using your brains, and great tools and resources.
Trading penny stocks is very attractive and simple because your main focus is buying low and selling higher. You can ride the wave, the business cycle, market trends, news releases and make money even if the company doesn't.
And let's not be too quick to judge penny stocks because we have to keep in mind that all companies have to start somewhere. Many companies that are successful now once began on the OTCBB exchange. It is advised to do your homework because there are scams. Companies can promote themselves using marketing or e-newsletters for company releases, news releases or anything to spike investor interest and drive up the price of the stocks. This causes the shares to be diluted.
As they sell new shares into the float, the price doesn't drop giving them maximum price for their diluted shares. To finish the scam, the companies will usually let interest in the stock to quiet down a bit and then they will file to reverse merger. This just means they cut down the amount of shares in the float. In larger companies this is a good thing but with penny stocks this just starts the process of dilution all over again. Many times this can be a last ditch effort to bring in money when a company just can't do it on its own.
Another scam is the "pump and dump." The price is driven higher and higher through promotions, chat boards, e-newsletters, website promos, etc. The penny stock rises and then very suddenly, they are "dumped" leaving shareholders with a big loss. The penny stock crashes. Believe it or not, if you can monitor these promotions and see patterns, you can get in as it is rising. Make sure to get out before it dumps or you will have a big loss.
Even with the skepticism and risk surrounding the best penny stocks, they can still be great and rewarding investments. The more informed about the market trends and promotions out there, the better decisions you will make. Make sure you research and look to penny stock websites that offer great resources and tools in aiding your own growth and trading development. Start with a top 100 list of penny stocks where you can see a company's quote, charts, history and news. This will give you more insight into a company's success and stability and where they are headed.
Just keep you head on your shoulders. Expect to make mistakes. You will win some, and you will lose some. With this, the sky is the limit in potential after proper due diligence. Some penny stocks can rise to 100% or even a 1000% at any given time. As one person loses another gains, just be careful you are on the winning end. Be smart, do your homework and have fun!
