subject: Tips On Investing In Penny Stocks [print this page] So you have read all about how you can make a lot of money by investing in penny stocks. Those who promote investments in penny stocks indicate that because you are buying low cost stock, you have a better chance of making money from your investment dollars. They indicate that it is easier for your money to double from .05 cents to .1 cents that it is for your money to increase from $30.00 to $60.00. The thing they do not tell you is that the percentage increase is really the same in both instances. Truly, it is easier for the $30.00 to double than the penny stocks.
The reason why it is easier for the $30.00 to double is because it has more going for it. It probably has its foundation on a solid company which has been around for a while. This company probably has a good line of products with a solid history of revenue growth. There is a reason why it has gotten to a stock price of $30.00. Those who promote penny stocks say that you may find the next Microsoft. The thing is, Microsoft was never a penny stock.
Some advice for those who do wish to venture into the frightening world of penny stocks. You should not invest in penny stocks unless you have at least a year of investment experience. Then you will be able to determine which stocks actually have a potential future. You should also rarely accept advice from websites, newsletters and un-solicited e-mails. There are many people out there trying to pump up penny stock prices so that they can then dump them and make a large profit.
Another piece of advice is to watch for companies that actually have a product. Many penny stock companies are only a wish. They state that they have the greatest idea in the world. The problem is they have been gathering money without any product for years.
You should also watch for volume. Even if you find a great winner, if you can never sell your holdings, what good is it. I once worked for a company which accidently purchased 100,000 shares in a penny stock. The price went from $.50 to $3.50. It was great. On paper, the company did very well. The problem was that the daily volume was only 3,500 shares. How was the investing company going to get their money out. The CFO eventually tried selling 5,000 shares as a test. The stock price was trashed as people dumped their shares thinking a large investor knew something. Volume is very important.
Take the time to research the opportunities that are presented to you. I once signed up for a penny stock newsletter just to test out what they had to say. I got five e-mails a day stating the greatest opportunities in the world. I needed to act now or I would lose out on the opportunity. What a scam. I checked into several of the stocks and there was no foundation to them.
You may be able to make money with penny stocks. Another company I worked for eventually went from $2.00 a share to $30.00 because they landed on a winning product. However, it took years for them to accomplish this achievement. For every winner, there are probably 1,000 losers. Are you willing to kiss all of those frogs to find one prince?
