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HomeSHARE MARKETIs It Profitable To Buy Penny Stocks?

Is It Profitable To Buy Penny Stocks?

Penny Stocks

The stock market is a platform which offers you opportunities to increase your wealth. Through opening an account with a broker by investing your money in appropriate stocks, you are able to trade the market and gain financial success.

In general, investors would rather play it prudent and invest in reputable large-cap and mid-cap stocks. If you are looking to make fast cash or to invest your savings, penny stocks could be an alternative.

However, penny stocks come with an extremely high risk and a higher than average return potential, so you should exercise caution when investing in this type of stock. Don’t put your money into stocks without doing a thorough study.

While this investment strategy is secure and profitable investing in penny stocks will yield excellent returns and assist you to reach those financial targets.

If you have an account for trading online and you are able to easily put money into penny stocks. If you’re interested in learning what penny stocks are, we will go over the details of the penny stock market in the following article.

What is Penny Stocks?

Penny stocks are one that typically is traded at a very affordable cost. They are generally provided by low-market capitalization firms.

Therefore, they are known as micro-cap stocks, nano-cap stocks, or small-cap stocks, in relation to market capitalization. It is usually determined by multiplying price of shares/stock by the number of shares outstanding.

In this way the companies are listed on stock exchanges with a good reputation, like the National Stock Exchange and Bombay Stock Exchange.

The lists of penny stocks are generally located in the lower sections of stock exchanges as well as lesser well-known stock exchanges.

On the Indian market A penny stock has an estimated market value of Rs 10, or lower. Prices of penny stocks can be prone to extreme volatility due to the frequency the stock is traded extremely low.

Contrary to blue-chip stocks, the technical analysis of penny stocks is almost impossible to accurately predict price changes. If you can plan your trades correctly, penny stocks could be a great trading opportunity.

Is Penny Stocks Investing Profitable?

The most important things to consider prior to making a decision to invest in penny stock is:

For beginners, Penny Stocks are an excellent investment option when you’re new to the world of stock markets.

This allows you to test your skills and make mistakes while trading on your own. Because the price is lower it is not necessary to put in a large amount of money. This also allows you to control your losses.

High Returns: In comparison to other investments they offer the highest returns. They are typically sold by micro-cap or small-cap businesses, and therefore these companies are able to grow over time. Not all Penny stocks fail! There are many great businesses with strong prospects and strong financials. To reap good returns, it is necessary to invest for the long run.

There is no entry barrier: When you invest in penny stock, these securities don’t require any rigorous analysis. If you are looking to begin making investments in stocks or engage in trade on your own, investing in penny stocks can yield profits. There is no obstacle to trading; all you require to have is an internet access as well as an account to trade.

Why do you need to consider investing in penny stock?

Penny stocks are an investment that is either hit or miss. There is no guarantee you will earn a profit or not.

In certain instances, companies who issue penny stocks could be slow to grow for a long time or may end up in debt. Let’s examine the reasons you should consider investing into penny stock.

Multi Baggers: A few penny stocks could become huge Multi Baggers in just a few years. These shares could make multiples of the investment amount. If they do, these stocks can yield double or, in certain cases 10 times more. However, finding these stocks requires a thorough market analysis.

Cost-effective: The advantage for investing in penny stock is the fact that they’re accessible at a very low cost. Even if you’re only able to invest a small amount of capital, you can begin investing the money you have.

Risk factors

Although penny stocks offer numerous advantages, they do come with risks. Examples:

The majority of them are issued by companies that are just starting out i.e. newly formed companies, which means there’s a lack of details about the company’s specific details like the stability of its finances as well as the past performance, potential growth and so on. Thus, investing in these businesses could be extremely risky

Scams: Always be aware of scams involving penny stocks. Many times companies do not submit financial statements for the Securities and Exchange Commission (SEC). This means it is easy for fraudsters to create artificially high prices for shares. In this kind of scam marketing, the scammers circulate false rumors in the market about the business that issued the shares. When the rumor became popular that the stock price soared and the fraudsters took advantage of the chance to sell the shares for a massive profit.

Brokers: A few brokers employ high-pressure sales tactics to persuade investors to purchase overpriced penny stocks. This could be risky as it could be extremely challenging to market these costly penny stocks in the future.

Before you invest in penny stocks, you must ensure that you study all stocks in depth. Don’t invest in any company without completing extensive investigation.

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