What are penny stocks? How to identify best penny stocks? Can I invest in penny stock? Well, before getting an answer these questions let’s take a look at one practical example. My friend had purchased penny stock of Sinner Energy in 2016. Today he is sitting on a hefty profit of 570%. In short penny stock can make you rich. On the other hand, penny stock can make you poor also. As per me, a penny stock is like rich-poor stock. It can make you rich or it can make you poor. So, let’s try to get more information about a penny stock.
What are penny stocks?
Penny stocks are low value stock generally available below Rs.10. It is low priced small cap stocks. These stocks have very low market capitalization. These stocks are speculative in nature and considered as risky due to lack of liquidity. Some penny stocks have potential to make you rich. A hunting for the penny stock is very tough task follow the steps given below to find out best penny stock.
How to identify best penny stocks?
In order to identify best penny stocks follow the steps method given below.
- Find out stock with low value and low market capitalization.
- The company should be in the business for several years.
- The promoter of the company should be well known person.
- The product and services of the company should be real and visible.
- The volume trading in the stock should be reasonable.
- The promoter holding in the stock should be reasonable minimum 30-40%.
- The company should have potential in terms of business and earning profits.
- The stock of company should be less volatile.
Best Penny Stocks of 2017
Can I invest in penny stocks?
Penny stock is double edged sword it can make you rich or it can make you poor. The investment decision in penny stock entirely depends upon investor. If you are risk taking investor with surplus money penny stocks are for you. The risk-return ratio in these types of stock is very high. Follow rules given below while investing in the penny stocks.
- Don’t invest large amount in this type of stock.
- Invest only in 2-3 stocks.
- Don’t follow invest and forget strategy.
- Don’t invest in penny stock blindly.
- Don’t try to average out your purchase.
- Buy the stock with large volume only.
Investing in penny stock is like gambling. You are investing money in the company with no fundamental in the hope of earning a big return. If you are conservative investor it is a big no for a penny stock.
Do you prefer penny stock for investment? Do share your views in the comment section.