Stock market investments are an old and practiced by masses. Every investment is precarious, but investment in penny stocks (trading under $5) is much more risky as movement in these stocks is more volatile than A-grade or blue chip stocks. They are not only prone to stock market crashes, and can even crash due to non-performance of business. It is also true that majority of the penny stocks are worthless or are complete failures because of many reasons like their small size and poor management, lack of funds for expansion and more importantly lack of big investor’s interest. Hence, it is the need for investors to analyze these stocks before making your hard earned money invested in it.
Alternatively, many people find it more fruitful investing in penny stocks as favorable investment can multiply your returns. It is nearly impossible to get similar returns in A-grade/ blue chip stocks, as these small companies are growing in terms of their business and can give healthy percentage growth based on low base effect compared to big companies which are already matured in terms of business and can give only average growth in business. The stock price of prosperous company which has given favorable business growth over past three to four years can tend to increase by 80%, 150% or even by 300% to 400% within very short span of time.
The researchers need to make full analysis on the stocks before making the right choice. So, on an average, your stock selection must be intelligent enough to choose that single profitable penny stock out of 100 available stocks. Any wrong selection among can ruin your whole investment. Proper analysis on company’s profile, select penny stocks wisely balance sheet and its future business prospects can help you choosing the right stock for you. Read more about selecting penny stock wisely.
There are various sources to collect information and database regarding the companies. These are:
1) Websites: Not only company’s website, but also other websites related to stock market can be referred to get complete information about its business, financials or even its stock price performance in past.
2) Newsletters and Forums: There are various newsletters issued by websites and online penny stock forums can also be good source of collecting information. Make sure that you’ve included your email ID on a reliable website to avoid any issues. It is important to know that there are many fraud websites floating the false news about certain stocks to gain money. Investors should know the difference between right and wrong companies and make sure that they don’t get trapped with wrong companies for investment.
3) Customers Reviews: Reviews posted by customers about product, financials of company product and reviews can also be a good judgmental factor for any investor for selection of right stocks.
To summarize, Penny stocks are very risky trades but can be a positive changers for you, only if chosen wisely. Risks need to be taken for better earnings, but it is wise to choose the most appropriate methods for getting the higher ROI.