Penny stocks are basically stocks that trade at a very low price per share. They are typically stocks of small companies with minimum investment. They have a smaller number of shareholders but they do have their advantages and disadvantages.
Some people believe that with this low investment, it is not stable or reliable. Some think of it as a good investment in which you have to give a very low amount and it gives a good investment return after some time. It might be true for some people and might not. That depends on the type of investment and the stock market. It takes investment as low as Rs.10 so, it seems quite confusing.
Advantages Of Penny Stocks
Let’s discuss some of the advantages. Having said that, turning a small investment into big money is the main reason people buy penny stocks. Some think of it as a risk. It creates a lot of excitement among investors and shareholders. It is not that all penny stocks move quickly in price, but the ones that do, allow people to see immediate gains. They don’t have to wait for years after putting their money at risk.
Disadvantages Of Penny Stocks
It is most likely said that penny stocks are traded on the Pink Sheets where the costs and requirements are almost non-existent and null for public companies. This is in comparison to the larger, main exchange-listed companies on the NYSE and NASDAQ. This results in market risks and many investors lose their money because of this. The lower share price creates the impression that small moves can create big windfalls. But many traders take this idea and invest even larger sums of money with the hope of making even more money. Never risk more than you can afford to lose!
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It is often misleading and people suffer a great loss if a penny stock price turns in the wrong direction. It is always suggested to make the correct decision and to know as much as you can before investing in penny stocks. This means reading corporate filings, looking into management, seeing what market sentiment is and be observant of any active penny stock promotions.
Conclusion To Buying Penny Stocks
Therefore, it is concluded to make a personal decision knowing every detail of all the pros and cons of penny stocks. So, these types of investments are not for everyone. Doing proper research with valid information is very important. Just because of a small investment, don’t lose your shirt trying to hit the lottery.