Are Penny Stocks a Good Beginner's Tool?

Discussion in 'Penny Stocks' started by forehandflick, Jan 30, 2015.

  1. Salauddin Morshed

    Salauddin Morshed Member

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    Investment in the penny stock will not be considered as prudent for a beginner. Investment in the penny stock is very risky. Initially, an investor should concentrate on protection and increase of capital by making a lower profit rather than making high profit by accepting high risk.
     
  2. gracer

    gracer Senior Investor

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    I was also looking for other investment options and Penny Stocks came into my mind because of the low prices of shares. I also thought it would be a good way for me to diversify my investments but reading the posts from the other members is now making me think twice about it. Good thing I was able to find this thread. :)
     
  3. Troponin

    Troponin Guest

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    They can either make you a lot of money, or make you lose a lot of money. Penny stocks are tempting because these are the stocks that people can make a ton of money on, really fast. That being said, consider a lot of penny stocks are in start up companies and biotech. The biotech companies aren't quite as bad, because as long as it's a large, established company, if you lose money in it, it could come back, it's just a matter of when. Are you willing to wrap up money in a company that might not see another increase for a very long time? With start ups, they could simply crash and burn, taking all your money with it.

    As always, do your research! JR Is a pro investor, and I know he dabbles a bit in biotech, but he has many years of experience and spends a lot of time researching these companies.
     
  4. rz3300

    rz3300 Guest

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    Well you know what they always say, with little risk comes little reward. I guess in that sense it would be appealing for beginners, although I am not sure if there is any real way to advance your knowledge there and really grow as an investor. It really just depends on what you are looking for in my opinion, and it you just want to test the waters then by all means penny stocks might be a good choice.
     
  5. JR Ewing

    JR Ewing Super Moderator Staff Member

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    FUNDAMENTALS! Whether the price is 50 cents or $5, $50, or $500 a share.

    If the fundamentals are there, and the stock is trading on an exchange with healthy volume and institutional interest, it's much more likely that the stock will NOT be trading for under $1.

    All else more or less equal, a stock trading for under $1 is statistically much more likely to be a bust than a stock trading for $10 or more. Tread lightly.
     
  6. remnant

    remnant Well-Known Member

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    The cardinal rule of investment is that you should invest what you can afford to lose. Penny stocks are affordable but they represent a high risk vehicle of investment. There are many scammers and manipulators who create a buzz through newsletters and social to offload them into the market only for investors to make a loss. The best strategy is to trade them in the short term using a reputable broker.
     
  7. Gazoo3000

    Gazoo3000 Well-Known Member

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    When trading penny stocks (not investing in) how valuable do you find the historic volatility index?

    I like to pick up a penny stock on the down swing (when I think it has hit its bottom) and hold for a few hours. I was curious if anyone uses the historic volatility index to assess the potential reversal?
     
  8. puru rama

    puru rama Active Member

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    According to me, the penny stock investment is good to start the trading because I understand the market from that.
     
  9. longtermbull

    longtermbull Administrator Staff Member

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    You also need to be very careful about the spread between buying and selling price on penny stocks - for some you would need to see a big movement just to make up the spread. JR, you are right - it does not matter if a stock is 1c, $1 or $500, if the story is right then buy.
     

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