Have you ever invested in penny stocks? Do you know, what are the options available for a fresher in stock market…..??? There are some points you need to keep in mind before you enter stock market (equity market). While investing in Stock market we have to keep in mind many things like how to invest, how to get trading account, where to invest etc. But the most important question is, in which kind of stock you have to invest to make profit out of your profit.
Have you heard about penny stocks? Penny stocks are one of the best options to park your money in stock market. Some of you might have invested or must be thinking of investing in Penny Stocks. But before investing in Penny Stock you must be aware of some of the critical things about Penny Stocks.
Penny stocks are named because they cost a penny once but it’s not true anymore. If you invest in Penny stocks you can multiply your money at the same time there is a risk factor also. So the possibility of making loss and gaining profit are equal in Penny Stocks.
Penny stocks are low priced because the companies are growing firms and they may not have sufficient funds for expansion and other things so they have more volatility.
If you are looking to invest in Penny Stocks, first of all you should know that Penny Stocks are not traded on standard stock exchanges these are traded on over the counter market.
While trading in Penny Stocks you have to hire a broker to facilitate your buying and selling of stocks. So you have to make sure that you must have enough money in account to cover cost of shares and brokerage.
Once if you decide to invest in Penny Stocks, the first question raises is how to select the right and profitable penny stock. For this you have to look into some important points such as;
Volumes of TradingThe volume of trading of the Penny stock which you are going to take is very important factor to consider while investing because if you want to sell your stock there should be somebody to buy. As the Penny Stocks are low liquidity stocks you have to be careful before investing your money in it.
Before investing in the Penny Stocks or any other stocks, you should have to check the fundamentals of the company. The financial health of company reflects in the value of its shares. Among fundamentals cash flow is the most important element. So it is better to spare sometime in doing analysis of fundamentals of the company. In addition to this keep track on its goodwill and future projects.
If the earning and fundamentals of the company are good it will be a wise decision to invest in those stocks.
It’s not only the cash flow which determines the financial health of the company. You should look at the key ratios like PE, EPS, PEG, etc. Price earnings ratio examines the market price of the shares and Earnings of the company. So you can compare the companies on the basis on their earnings and growth.
So do not just take the stock and sell it out for the reason that it costs you less than other stocks and it may reach high levels one day but with a high risk.
See Also: basic tips to invest in the stock market
Once if you have chosen the stock to invest, by merely doing this you can’t be at rest, you have to look in to many other things while making investment. We are trying to give you some tips for the investment in penny stocks;
One of the effective techniques to trade in penny stocks is to focus on the particular stock. As we have already discussed about the relevance of selecting the right stock and company to stock. So first and foremost thing is to understand the inside and out activities of the company. So you should target one stock after doing proper research on it.
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