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Everything You Need To Know About Penny Stocks
Penny shares offer a great way to start growing your wealth. If you want to start investing with a smaller amount, you can still get a larger volume of shares for you money.
The reason to choose a penny share over regular ones is that you get higher volume of shares for a considerably smaller investment. If you purchase a large pool of these shares, if the company makes big money, it has the potential to make you rich overnight.
Penny stocks commonly known as penny shares are the shares of small public companies and they are traded in a very low per share price. According to United States Securities and Exchange Commission (SEC), any security traded below $5 is by definition a penny stock. To officially qualify as a penny stock, it should not be a listed on any national exchange.
Reasons Why People Are Scared Of Investing In Penny Stocks(Please note that most of these reasons apply to regular stocks as well so overall the risk factor is nearly the same.)
- Though penny shares are the most widespread form of stocks that can be used for fraudulent purposes. It is important to note that even though the penny stock company may be small, frauds can cost millions of dollars.
- They are more prone to manipulation and other influences.
- Penny shares can also go up and down depending on the market. What most people find it shocking to know is that penny stocks, since they do not have any past memory or comparisons, can even fall down to 0.
- The risk factor is comparable to regular stocks. Cheaper stocks doesn’t equate to lower risk. You can still lose all of your investment just like in a regular stock.
Misconceptions About Penny Shares
- You can’t short sell penny stocks
There is no such rule in place that stops the share holder to employ short selling. It’s simply misinformation from bad brokers that has been spread over the years.
- Buying big-name shares is the only way to make tons of money.
If this were the case in reality, no one would purchase shares of the companies that are not on the top. But we know that is not the case. You should do your research and invest in companies who have a good history and has shown good potential.
- You should only trade penny shares in short-term
Penny shares can make you an incredibly rich person in a long-term investment strategy. Diversify your investments and give smaller companies a chance to grow your investment. Putting your trust in a new market player might pay of handsome dividends.
Bonus tip #1:
Stop investing based on what you read, heard on a blog, website, video over the
internet by an “expert”.
Really, think about it. If it was this easy to make thousands of dollars in the stock market, wouldn’t every person following their advice be wealthy by now? Stop taking advice from these sources and go do your own research and background-checks.
Bonus tip #2:
The penny stock promoters that call/email and text you are simply marketing
It’s their job to get business from you. Avoid impulsively following their advice because if you lose money, they can’t be held responsible. So take care of your investments personally rather than giving the control in somebody else hands.
Now that you are well-equipped with the knowledge of penny stocks, we wish you a bright financial future. Happy investing!