Earning million pennies from your penny stocks
November 30th, 2009
Earning million pennies from your penny stocks
Penny stocks are designated as penny in terms of their market capitalization.
These might be low priced due to some reason such as these are of the companies looking for a way to raise capital. These might have good management, better future prospects but with insufficient funds due to which their share is low-priced. It is a matter of fact that a smaller company tends to grow faster and thus their stock tend to move at faster pace. With this Optimism in mind, don’t forget Penny stocks could be worth millions as well. So before underestimating them; keep it in your mind that it might be great opportunity turning your small capital into big amount
Penny stocks are considered more risky investments due to greater volatility factor. Secondly, these are generally traded in lots of 1000. So even if the price goes down by 1 buck, you will loose 1000 bucks in fraction of seconds. Thirdly, penny stocks might not be so frequently traded on stock exchanges. Suppose some rumor broke out and you just wish to exit the stock. But since the stock’s trading volume is low, you do not find buyers to buy your stock. Keeping aside all these factors, a well planned strategy might take you to diamonds hidden inside a coal mine. But before you really enter into the arena ask yourself few questions:
What is there in that penny stock attracting you to buy it?
What is the price at which you must exit the stock?
Once decided upon the stock to buy, exercise your mind to know is it really worth buying? Below are the three criterion helping you take a final decision.
Company fundamentals: Good cash flow is the most important consideration in choosing a penny stock. Spare sometime in knowing company fundamentals in addition to its goodwill and future projects. If a company has a good chance of success, please go for it.
PE and PEG ratio examine the PE ratio of the stock you and compare it with its peers doing well in the market. A safer way however is to find out the Price/Earnings/Growth (PEG) ratio (PE ratio divided by the projected growth in the next 3-5 years). Remember you will choose a stock with higher PE but lower PEG.
Trading volume: Assume yourself in a situation when you want to sell your stock but no one is ready to buy it. Stocks with low liquidity are difficult to buy or sell for the prices you want. So think twice before you buy such stock.
That was all about the reasons for you to buy a penny stock and considerations while deciding which one to buy? But the story does not end here due to associated risks. The best strategy to minimize the risk is to plan your exit having decided your expected profits. Do not just pump and dump the stock for reason that it costs you less than other stocks and will reach very high levels one day.
All The Best
- Renuka Kinger
Categories: Trading Basics, Your Money
can you suggest me that if im investing 3.5lacs so which share should i buy and i only want to invest money for 1 month and should i do intraday or should go for delivery.
can you suggest me that how to study the share market.
it really helpful……thanks for this information
can u give an idea how to get these pinny stocks….and how can we get information about the ability of the people running these compnies…?
Thanks a lot for your information.. really thankful
Hi… i am interested in shares trading but i am totally new in this field. is there any institution where i can get full knowledge about shares business. how much fees and duration of the courses.
or plz give me the idea of these business iwant to start business in share market as soon as possible so plz help.
Trading penny stocks is a great way to build up a lot of cash. It is so easy to maximize your profits when the stocks only need to move a little bit. It is great for any portfolio.
Dear Renukaji,
can you please give me info about how i could get the info about company’s future plans. i am also interested in other info & data ,for instance the P/E ratio and the P/E/G ratio that you’ve suggested. I actually feel that investments in penny stocks can prove to be highly rewarding, but am not being able to make a real wise decision. please suggest me some nice courses also, which would be good for a non-commerce student as i am a science graduate.. Thank You.