“Penny stocks” are becoming more and more popular in the trading world and, while professional brokers may have been trading with them since time immemorial, independent investors are even slowly making the transition. Some brokers even go to the extent of solely trading in penny stocks because of their high growth potential and the profits that come with it.
Today we’ll be giving you a crash course on penny stocks and what you need to do to make sure you get the most bang for your buck. So without further ado, let’s go!
What Are Penny Stocks?
As the name suggests, penny stocks are (or at least used to be) stocks whose share price is in pennies. Nowadays, the term also includes shares whose price falls in the $5 range. Even though the threshold of “penny” is not being adhered to with $5 stocks, the name applies as even $5 stocks are “pennies to the dollar” when you compare these prices with larger blue-chip stocks, whose price can go above the $1000 threshold.
Other than the low price, penny stocks also have a high potential for profit and growth. Companies issuing such stock have usually just gone through their IPO and are in the early stages of their eventual business plan to grow. As such, there is a great chance that the price of the share will increase with time as the operations of the company grow. Statistics have shown some penny stock companies to have achieved 2400% growth over two years. Just imagine how much you could multiply your savings if that kind of growth were to occur.
The Volume of Shares – The Timothy Sykes
Furthermore, another advantage associated with penny stocks is that you can get a much larger volume of shares and have a bigger holding in your portfolio than you would if you were to invest in blue-chip stocks. You could get a lot more penny stock shares with $10000 than you would Google ($1100+) and Apple ($208) shares. With that amount of money, you could get 2000 shares of penny stock (if it cost $5 per share) in comparison to less than 10 shares of Google and 50 Apple shares.
However, while the potential for profit and large volume holding are very enticing qualities, one needs to remember that penny stocks are not a guaranteed way of getting rich. Just as you would with any other stock, there’s a significant amount of risk to take on with trading in penny stocks. The companies issuing these stocks could fold the day after you invest, or even go on to run their operations for the next 50 years. There are so many factors at play that one needs to accept the risk and be prepared to suffer losses.
The best way of mitigating the risks associated with penny stocks is to stay true to your analysis. Ensure that you are regularly and thoroughly analyzing and reviewing your portfolio and the companies that have issued the stock in your portfolio. When it comes to the companies, some of the factors you should be looking at include revenue, profits, losses, business strategies, regulatory compliance, marketing strategy, and customer interaction.
Analysis mitigates the risk mentioned above because all the factors you’re looking at will have a profound impact on the company and, by extension, the share price. One small misstep in terms of regulatory compliance. A significant complaint from a customer because of negligent services or goods can pretty much cause these companies. Practically in their infancy stage, to collapse and fold completely.
If you’re looking to switch your portfolio to only include penny stocks. You’re going to need to focus on the analysis part of things with even more commitment. Analysis and constant vigilance provide a strong foundation for any successful penny stocks portfolio.
Penny Stocks by Timothy Sykes Investment Strategies
The most common, and easiest to manage, investment strategies for penny stocks is “buy and hold”. This is where you buy a large block of shares. With penny stocks you’ll be able to ensure your holding actually is large because of the low price. Hold them for a long period of time. Once your stock has achieved the desired share price, you can sell and enjoy the profit. As time passes and the share price grows, provided everything goes well. The risks of the stock are slowly lower until the growth becomes stagnant and the price achieves stability.
Another strategy is to short-sell through day trading. However, there are disadvantages when it comes to this approach. First and foremost, you wouldn’t be able to do it as an independent investor. Especially if your investment is solely for the purposes of saving and building a nest egg for yourself or your family. This approach requires in-depth analysis, which is not only a lot more detailed but also requires constant vigilance in real-time. A professional broker would be able to do this but then you would have to bear commission expenses. There’s also a lot more risk associated with this strategy.
Educate Yourself – The Timothy Sykes Review
It might also help if you were to educate yourself more on the topic. If trading in penny stocks appeals to you, then you could vastly add to your knowledge. By subscribing to Timothy Sykes services. With a vast range of educational DVDs and the online-based Timothy Sykes Millionaire Challenge. You could learn about a long list of topics including trading in penny stocks. Stock market analysis, regulatory compliance, and taxation. The Millionaire Challenge even sends you to live updates on different stocks. Stock tips for investment, and interesting articles on market development. To learn more, check out this Timothy Sykes Review.
Penny Stocks by Timothy Sykes Conclusion
Finally, penny stocks may seem like an easy way to get rich. But nothing else could be farther from the truth. You still need to pay a certain level of attention to stocks to ensure that your investment is safe. In addition, the stock is heading in the right direction. With proper analysis, constant vigilance, and a little bit of learning. You’ll be able to trade in stocks and make a decent amount of profit.