Dealing with Penny Stocks

| January 14, 2009

Penny stocks are considered to be one of the high-risk investments. These stocks are sold below $5 per share. These stocks are also commonly known as small cap stocks or micro cap stocks. This is not the favorite of smart investors and long-term traders because of the risk factors and the volatility involved. However, it does not mean that people are not trading with penny stocks. There are good number of people who invest their money in penny stocks and lose their money in spite of the high risk factors involved.

One of the reasons why smart investors and long-term investors avoid penny stocks is that they fluctuate heavily. In fact, this fluctuation is what will bring bad return to the traders. Experts avoid penny stocks because if the value of a particular stock has to reach that low, then probably they are more likely to disappear from the listing completely. When penny stocks disappear from the listing then it is an indication that such a company has reached very poor financial condition and it can also mean that such companies are bankrupt.

However, when you want to trade with penny stocks, it is good to go with top stock picks that you can count on. These picks will tell you which are the best penny stocks for investing your money. You will not be able to find penny stocks in top exchanges such as NYSE or New York Stock Exchange or AMEX or American Stock Exchange. If you want to trade penny stocks, it will have to be over the counter. Another way of trading with penny stocks is through pink sheet.

Sometimes, beginners prefer penny stocks because it does not require you to make a huge investment. It is like winning the lottery, if you are lucky, you will be able to get huge profit out of your penny stocks but it is more likely that you will  lose your hard earned money. Since penny stocks have almost zero visibility, trading with penny stocks is disadvantageous at all times.

When you opt for penny stocks, you must make sure to go only with those penny stocks that are found in the reputed exchanges. This will give your penny stocks a certain amount of credibility. Normally you can find it listed in Nasdaq Small Cap. Those who like to have a diversified portfolio will invest a certain portion of their money in penny stocks.

By making use of reliable stock picks, you can protect your investment on penny stocks to a certain extent. Because a considerable amount of market research goes into coming up with the penny stock picks.

Whether you are investing in penny stocks, mid cap stocks or growth stocks, you must restrain yourself from getting over enthusiastic about a certain stock and from ignoring the signs that warn you of risky investments. Relying just on one’s hunches may not be that helpful when it comes to stock trading. So take into consideration expert trading tips including stock picks from reliable sources such as If you want to be successful in stock trading you must make use of every little help that you can get.

Category: Business News

About the Author ()

Investing in the stock market today can be extremely confusing, even for professional investors. You can be extremely successful, or you could end up losing money. Keep a constant eye on your portfolio. Be aware of how your stocks are doing, as well as how favorable the stock market conditions are today.

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