Buying And Investing In Penny Stocks

Penny stocks are an ideal investment for investors who do not intend to spend a lot of money but they still want to enjoy big profits. If you are thinking of investing in these stocks, you need to know what to do to get huge returns on the money you put in. Here are a few tips on buying and investing in penny stocks.

Pay Attention to Earnings Growth

One of the most important factors to keep in mind when you buy or invest in penny stocks is a company’s earnings growth. Find companies that report solid earnings. Some companies only report great earnings for a short time. To make profits by investing in penny stocks, you have to look for profitable companies that have reported good growth throughout a year.

Unlike other stocks, it is not enough to look at a penny stock price and determine if it is a good deal. You have to go out of your way to find out the company’s worth. Find a company that is making money. It is also important to consider the value of a company’s assets. Investing in a company that is going through financial difficulties may be very costly in the long term.

Sell Fast

Investing in these types of stocks requires you to sell fast. You should not hold on to your stocks if you want to make profits. Penny stocks are considered an attractive investment because it is possible to make between 20% and 30% on your initial investment within days. Once you get a good return on your penny stock, sell it fast and purchase others. One of the most common mistakes that traders make when investing in these stocks is waiting to get bigger returns before they sell. Take the profits you get and move on to something else.

Find High Volume Stocks

Investing in penny stocks only makes sense if a company trades a minimum of 100,000 shares in a single day. When you invest in low volume stocks, it will be difficult for you to make the big profits. Find out the specific number of shares that a company trades and its price before investing. It is advisable to trade in stocks that are at least worth 50 cents because this means that they are liquid enough.

Take Advantage of Earnings Breakout

Buy stocks when they are at their highest price or when a company trades the largest number of shares. Investing at this time allows you to get the best stocks in the market. You also get a better chance of selling the stock at a higher price if it is on demand. Stocks tend to go up in terms of value when the core business improves. This means that people will be more interested in investing in a stock when its earnings are at their highest.

Investing in penny stocks may be more volatile compared to other stocks but you also have an opportunity to get huge profits if you identify valuable companies that have good earnings growth over an extended period.