subject: Investment In Penny Stocks Is It A Profitable Venture? [print this page] Many people ask me about whether it will be a worthwhile decision to invest in penny stocks. I ask them to go back to their homes first, stand in front of their mirrors and ask their souls- Shall I invest? Do I have the courage to withstand the monetary loss if I suffer any? Penny stock investing is rather a matter of personal choice and inclination. The first quality you must have within you is the ability to shoulder high risks. Let us explore the pros and cons of penny stock investing in this article.
Basic Qualities of a Penny Stock Investor
First and foremost, you must have the attitude to shoulder high risks. Secondly, if your financial position is not very strong and you do not have excess money to spare, you should do better if you avoid penny stock investing altogether. Instead, concentrate on established stocks only to the extent you can afford. Again, even if you have lot of surplus money, but you are a risk-averse investor, you should still avoid investment in penny stocks. Now, if you both have the surplus money and is mentally skewed towards taking high risks (and hence the possibility of higher returns), then penny stock investing might be your ballgame.
Market Study
Once you are ready to invest money in penny stocks, you should ensure that your investment has a reasonably fair chance of yielding returns, the market risks notwithstanding. You need to study and consider a number of things such as, the reputation of the business, the financiers behind the business, past performance etc. You need to have a good idea about the monetary fundamentals of the company. The enlisted share price of a company may be influenced by several factors like market sentiment. On the other hand, the fundamentals of a company are dictated by the assets, liabilities, and cash flow of the company. You need to open up the veil from the companys financial statements and have a discerning evaluation of its worthiness. If the company that you are investing in does not have a sound fundamental foundation, the chances of your money getting forfeited is quite high.
Dont Put All Your Eggs in One Basket
You must have heard about the age-old adage about investment Dont put all your eggs into one basket. Follow this principle even if you have inside information about the company. Inside information can be classified as privileged information that can affect the net worth of the company in the coming days (within a short span). Such information can be the likely takeover of the company that you are interested in by a corporate behemoth. This should be exclusive information not yet available to the public. If you are reasons to get convinced, you can go ahead and invest in penny stocks, but the caveat dont put all your eggs in one basket still stands. Sometimes, matter just fails to happen and you will feel dejected to hold a stock that has a very little worth.
Other Concerns
One important thing about penny stock investing that a penny stock newsletter available on the web may not tell you is that when you are investing in penny stocks you may not be able to trade them quickly. The problem is more acute if you have invested a large amount. If a short-term liquidity is a concern for you, you should not bet on penny stocks; instead, stocks on a standard stock exchange will be a better option.
To summarize, penny stocks carry greater risks and lesser liquidity options. Invest in penny stocks after careful investigation. Dont over expose yourself in favor of a single company. At the end, you need Lady Luck to smile upon you for a healthy gain.
