What is the Best Way to Invest in Penny Stocks?
Investing in Penny Stocks is a great idea for a mature investor who is looking to diversify into stocks with a high risk/reward ratio.
Basically this means that there is an opportunity to win big off of smaller investments in penny stocks, but there is also an increased risk involved.
Buying Penny Stocks should be done with caution, and only when an investor is fully educated on the workings of the stock market.
That being said, utilizing penny stocks to help boost a portfolio is a great idea.
I've seen many occasions where in a trendless market for larger stocks (such as right now), betting on the fundamentals of smaller, low-priced companies can produce returns in excess of 100% and dramatically impact overall portfolio performance.
That being said, the question of how much to invest in penny stocks and where is up to the individual investor and the level of risk they can "stomach.
" The risk involved with penny stocks is that they lose a good amount of their value due to low volume trading or go out of business altogether.
Many investors choose to stay away from these stocks with the logic of: "if they're low-priced, they're low-priced for a reason.
" This logic stems from the basic law of supply and demand which is integral to the markets.
Where this logic is proved wrong however, is with penny stocks that are low-priced not because of their business prospects, but because they haven't had any attention paid to them.
In these cases, when good news (or any news sometimes) hits the press, these stocks can go skyrocketing due to a speedy rise in investor interest.
Finding stocks that are primed to do this is where penny stock investors make their money.
Basically this means that there is an opportunity to win big off of smaller investments in penny stocks, but there is also an increased risk involved.
Buying Penny Stocks should be done with caution, and only when an investor is fully educated on the workings of the stock market.
That being said, utilizing penny stocks to help boost a portfolio is a great idea.
I've seen many occasions where in a trendless market for larger stocks (such as right now), betting on the fundamentals of smaller, low-priced companies can produce returns in excess of 100% and dramatically impact overall portfolio performance.
That being said, the question of how much to invest in penny stocks and where is up to the individual investor and the level of risk they can "stomach.
" The risk involved with penny stocks is that they lose a good amount of their value due to low volume trading or go out of business altogether.
Many investors choose to stay away from these stocks with the logic of: "if they're low-priced, they're low-priced for a reason.
" This logic stems from the basic law of supply and demand which is integral to the markets.
Where this logic is proved wrong however, is with penny stocks that are low-priced not because of their business prospects, but because they haven't had any attention paid to them.
In these cases, when good news (or any news sometimes) hits the press, these stocks can go skyrocketing due to a speedy rise in investor interest.
Finding stocks that are primed to do this is where penny stock investors make their money.