What are penny stocks?
If you want to trade in stocks with little initial capital, you might find penny stocks enticing. Penny stocks are incredibly cheap stocks. They can be as cheap as a penny. Historically, penny stocks have made investors a great deal of money even with their risky nature. Traditionally, stocks can trade anywhere from under a dollar to over $445,000 per share. Warren Buffet’s Berkshire Hathaway share grew from trading at $415,000 per share in June 2020 to $445,000 per share as of May 2021 but penny stocks approach the $0 mark very often.
What they are…
The actual definition differs. The Securities and Exchanges Commission defines penny stocks as stocks below $5. However, many investors choose to treat only those stocks that are below $1 as penny stocks. Penny stocks are small-market capital stocks representing the shares of companies that trade at ultra-low prices. Even though most penny stocks belong to companies with low market capitalization, penny stocks may belong to high cap companies. Many penny stocks are not even traded on the stock market as they cannot meet the basic requirements needed for them to be listed. They are therefore traded over the counter.
Profiting from penny stocks
They usually belong to unknown companies or highly risky ones. You would have to trade in a large volume of penny stocks to turn a serious profit. Because penny stocks are usually not traded on a formal stock exchange, they are usually not subject to the rigid criteria of the Securities and Exchange Commission, therefore, the trading information is less credible. The stocks might even belong to “pseudo companies” or companies with sketchy financial practices.
It is not all doom and gloom. People have turned huge profits from investing in penny stocks. Once they educate themselves and keep a level-headed salient business mind, they can make good profits.
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Investing in penny stocks?
First of all, you need to get a stockbroker to aid you; and to buy penny stocks, you can make use of an online platform. Treat trading with penny stocks like you would do with betting. Only invest money you can afford to lose as it tends to be very high-risk investments. It is always wise to make contingency plans outside investing in penny stocks and to diversify your investment portfolio. Contingency plans like having emergency funds are a great buffer for the outcomes that could result from investing in penny stocks. You should also keep your insurance money up a hand in order to ride out a long period (usually months) following trading gone bad.
An alternative way to invest in stocks with little money is through slice trading, where you can invest in stocks regardless of their price per share. That way, you can have a piece of the pie without having to pay for the whole pie.
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Conclusion
For most, the promise of turning in a huge profit quickly from trading in penny stocks isn’t worth the risk. The better alternative might be to trust in stocks of regulated markets where there is minimal risk involved. If you choose to go the slice trading route, InvestSika is one of the places where you can begin.
