To familiarize yourself with penny stock investing, you should initially be aware of the significant variation between the more traditional mid-cap and blue chip investments and the modern micro-cap stocks. Unlike purchasing shares from a huge, stable company, investing in penny stock market entails managing speculative investments.
Types of Penny Stocks
Trading penny stocks is literally trading for pennies for each share, as for low as a couple of dollars. The great thing about penny stocks is that at times they progress and transform to mid-cap stocks, increasing in value over a hundred of times and generating more money for you.
Juniors otherwise known as micro-caps are penny stocks that come with greater price volatility. As a result you can experience faster and greater gains as well as losses in asset values. It is exactly this volatility that appeals to investors so they invest in the junior markets, since one good stock pick can result to returns hundreds of times larger than what you can make on bigger markets. Although, there is greater risk involved in purchasing blue-chips, bonds, or defensive stocks; the added peril adds up to the possibility of generating huge gains in the future.
Penny Stock Lists
You should make a list of penny stocks that you deem profitable. Most penny stocks are technology or resource companies that sold shares initially in an effort to collate funds for product development or company expansion programs. It’s critical for you to note though that many companies come with large debts and are not essentially making more profit than they are losing.
However, keep in mind that penny stock investing lies significantly in the prospective of a major or even minor achievement or success of your preferred company, specifically if the price climbs dramatically.
Penny Stocks Profit Potential
There are many web services that research about penny stocks for many years now. These firms have become an efficient tool at discovering the most excellent small cap investments and the most profitable penny stock market situations.
Aside from getting the assistance of a penny stock broker, here are many ways to generate money from penny stock investments:
- Basic Precursors – Frequently, technical analysis can uncover patterns in the trading of penny stocks. At times, these patterns show great purchasing opportunities, where the underlying stock present high chance of moving up and only low probability of going down.
- Promotional Stocks – Promoters catch the attention of investors for these stocks to compel higher share prices. The promoters commonly own large amount of shares, thus they make more profit when the share price increases. Consequently, they market their holdings into the promotion to obtain huge personal profit. After which they move on to another stock. You should be able to keep an eye on the promoter’s actions to be rewarded through this strategy.
- Fundamental Strength – This entails studying a company’s debt load, earnings, assets, and many more. It is believed that you can only find long term investment opportunities through in-depth analysis of the financial statements of a company.
To protect yourself against immediate loss of capital, you should get educated on the basics of penny stock investing. This will ensure happy and profitable investing.