Tips For Penny Stock Investing
Investing in the stock markets has become the alternative to trying to make an extra buck. Investing in stocks is like having a second job hoping to get additional finances for a rainy tomorrow. Since not everyone is able in investing in the large enterprises’ shares, the next best option is penny stocks. These are stocks that are traded at a very low price, below $5 and even as little as less than $1. They are usually sold over the counter through quotation services such as the OTBB and Pink Sheets. Here are a few tips for penny stock investing.
Penny Stock Investing Tips
1. Know the company you are going to invest in
The last thing you want to do is invest in a company on the verge of bankruptcy. Research extensively and know about the company that the shares represent. Only after you have reliable information you should invest in the stocks.
2. Consistent share volume trades
Look at the number of shares traded every day and see if they are steady or fluctuating. If there are no volume deals, then you’ll end up with dead stock and eventually have to sell them off at a throwaway price.
3. Have a plan and know when to walk away
Because penny stocks have a very low share price, most people tend to hold on to hundreds of thousand of shares. So, once the liquidity evaporates, you will be forced to sell at a low trading price. Do not hold on to the shares for too long, observe the market trades and know when to buy or sell.
You will have to realize when to sell or buy. But it is best if you make a planned way before you invest in these stocks. Don’t get greedy, follow your plan, and make certain decisions if you have to but do not sit for too long.
4. Be Patient
These stocks are high-risk investments. The prices fluctuate quickly; the trade volumes will dramatically change and in the process, you could end up losing some of your investment. With all this in mind, it requires that you be patient, tolerant and be prudent. Even experts have a hard time predicting the trends of these high volatile stocks.
5 .Calculate the percentage of your investment
Do not ever buy stock with regards to the volume of share you want to own. For example, most people buy 2,000 shares rather than focus on the amount of money invested in it. Purchase the number of shares that the amount you have can afford. So, if you have 4,000 shares at $0.25 and 1000 shares at $1, you are still going to make the same percentage.
Having a plan and being patient is key in penny stock investing. Following the above tips for investing in penny stocks will help as one invests in them.