Articles Investing

What Are Penny Stocks?

Penny stocks are shares that trade from a fraction of a penny to $5.

They are riskier than average investments but have tremendous reward potential. Indeed, some penny stocks have gone from 25 cents to $20.00, while others have become worthless.

In the past, penny stocks had a bad name because of risk and lack of information about the companies.

Penny stocks are issued by companies who have small market capitalization. This kind of investing can be very exciting as it involves cheap entry into the market and the results can sometimes have huge gains. Finding the best penny stocks can be a little difficult. It requires a combination of experience and luck. You have to make smart decisions when buying penny stocks as they are highly volatile. You must be observant and be knowledgeable about news and price movements.

To find the best penny stocks in the market, research is extremely important. Research is an essential part if you plan to be a successful penny stock investor. Analyzing the stock’s price history is important as well as any fluctuations or steady increase or decrease in the prices. All this information can greatly help in guiding you to buy the right penny stocks. The background of these companies must be thoroughly looked at and researched as it can help you decide which penny stocks may be worthwhile investments.

A few things to look at are a company’s revenue growth for one. High profits and earnings can help the company’s stock price shoot up. Avoid investing into penny stocks that have an annual revenue of less than $10 million. Also, companies that dwell in debt may not be good investments. Always make sure the penny stock you are looking to invest into has a higher than average trading volume. Buy penny stocks that have at least 100,000 trades a day.

When investing into penny stocks analyzing the movement of the stock volume is important. Check how frequently the stock is bought or sold. The internet is a very useful tool for anybody who wants to trade penny stocks.

Nowadays, investors are quickly learning that penny stocks represent all the small companies across America, that are great and have yet to grow or be discovered. Many investors like penny stocks because it does not take a big cash outlay to get started, and you can own a piece of a good company inexpensively.

The upside of penny stocks is the ability to turn a small investment into a fortune.The downside is the risk, volatility of the shares, and the lack of corporate transparency.