What are Penny Stocks?
Penny stocks are common stocks priced under $1 per share. Penny stocks are most often offered by new companies with small market capitalization to raise their capital and market value of their shares. Penny stocks are ideal for new investors because these are not expensive. Some people believe that penny stocks are riskier because their trading volume is low and companies have the small balance sheet and limited resources as they are usually start-up firms.
Why Penny Stocks?
Buying penny stocks is no-doubt risk but still attracts investors as a possibility to get big return and proceedings, because there is a term for financial investors that higher the risk higher the return.
Penny stocks have some advantages as well as some drawbacks; the important thing is buying right stock at right time. So it depends on investors whether they believe in what they have perceived generally by word of mouth or decide to remain unconvinced, mostly in the cases when an offer is making big promises.
Regardless of the risks, there is an attraction in penny stocks that makes impossible and unfeasible for some investors to refuse to buy them. Small cap Stocks are safe place if someone is just starting to invest as these stocks can rise as much as +1,000%, in the period of a few hours.
You should more careful and cautious if you are a new investor because there might be some frauds and cheats that can create problems. When you have decided to invest on the small cap stocks as you came across, hang around and scrutinize whether the stock can become effective and valuable for you or not and never make quick decisions.
Generating Cents from Small cap Stocks:
It is improbable that all small companies will turn into big ones and many of these companies may collapse so there is a much more risk involved that you will lose your wealth. However infrequently one of these companies make it large and you have hit the jackpot.
Traders in penny stocks generally follow a tactic where they acquire shares in ten companies with the optimism that one of the ten will in fact succeed. Also due to the low share price and low liquidity (they do not trade often) when the share price increases it can move up in multiples: for instance a ?10 share can goes to ?20 within some days and you have successfully doubled your money. Some traders place a normal order when the stock hits a certain price and they take the earnings. The catch here is that might not enough buyers at that level really to sell your shares; this is the threat of trading in shares that do not trade regularly.
Any investment in stocks is element of your high risk portfolio and you should only invest a little percentage of your savings.
If you want to know what are best penny Stocks you may need a Stock Professor.
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