Penny Stocks And Their Place In Investment Portfolios
A penny stock is defined through several definitions, but for most it is a stock that is any amount under $5. A penny stock is cheap to pick up because of its volatility, but can also make a fortune for investors. Even small changes in stock increase can mean dramatic return on investment with high volume.
A lot of the penny stocks you find will include companies that are new or on the verge of bankruptcy. Obviously, there is going to be a bit of risk involved. Finding a stable penny stock is going to be tough unless you have experience in finding them. You may even be trapped into keeping the stock if you are not able to sell it once you are ready to do so.
It would be logical to assume that all stocks started out at a price of next to nothing, but that isn't the case. Any company with a good history will start out at a price of $10, or even $20 or more. It's a good lesson to learn, so you won't be fooled in thinking that investing in a wide array of penny stocks will yield a sure profit once you get lucky. It's possible, but improbable.
Spread out your investment among several different stocks. Ideally, you should spread it out as much as you possibly can and take it from there. With penny stocks being volatile, you need to be able to shift your investments from one stock to another as soon as you see opportunity. Sticking to one or two isn't a bad idea, but it is inefficient as an investment model.
Know when to get out of an investment. This is especially true with penny stocks, where one recession can wipe a company off the map in a single day. If you have a day where you make a return of 20%, and have invested a considerable amount, it's time to fold your hand and cash out. Penny stocks are rarely good long term investments, and thus have their association with day trading.
Penny stocks will lose you money at some point or another. They are too unpredictable for anyone to make a winning decision every time. The key here is to learn from your mistakes and to funnel your investments appropriately. Make an effort to not use money you shouldn't be investing, and certainly don't turn investing into a game of gambling or chance.
Final Thoughts
The stock exchange is a cruel beast to tame. In time you will gain the experience needed to trade with confidence. Until that happens, read up on strategies and learn from others before you. Having a mentor would be a good idea if you can afford one. - 23199
A lot of the penny stocks you find will include companies that are new or on the verge of bankruptcy. Obviously, there is going to be a bit of risk involved. Finding a stable penny stock is going to be tough unless you have experience in finding them. You may even be trapped into keeping the stock if you are not able to sell it once you are ready to do so.
It would be logical to assume that all stocks started out at a price of next to nothing, but that isn't the case. Any company with a good history will start out at a price of $10, or even $20 or more. It's a good lesson to learn, so you won't be fooled in thinking that investing in a wide array of penny stocks will yield a sure profit once you get lucky. It's possible, but improbable.
Spread out your investment among several different stocks. Ideally, you should spread it out as much as you possibly can and take it from there. With penny stocks being volatile, you need to be able to shift your investments from one stock to another as soon as you see opportunity. Sticking to one or two isn't a bad idea, but it is inefficient as an investment model.
Know when to get out of an investment. This is especially true with penny stocks, where one recession can wipe a company off the map in a single day. If you have a day where you make a return of 20%, and have invested a considerable amount, it's time to fold your hand and cash out. Penny stocks are rarely good long term investments, and thus have their association with day trading.
Penny stocks will lose you money at some point or another. They are too unpredictable for anyone to make a winning decision every time. The key here is to learn from your mistakes and to funnel your investments appropriately. Make an effort to not use money you shouldn't be investing, and certainly don't turn investing into a game of gambling or chance.
Final Thoughts
The stock exchange is a cruel beast to tame. In time you will gain the experience needed to trade with confidence. Until that happens, read up on strategies and learn from others before you. Having a mentor would be a good idea if you can afford one. - 23199
posted by X - Men @ 3:20 AM
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