Investing in penny stocks

Investing in penny stocks

Its better to understand the difference between micro-cap stocks, blue-chip and mid-cap , before you start investing in penny stock. Penny stock investment are actually speculative investments, unlike to large cap or blue chip stocks like Reliance Inds, Reliance capital, SBIN or TATA STEEL, MOTORS.

Penny its self means small amount. Instead of large price they value is very call like Rs.1 to Rs.10. The best part of investing in penny stocks some times they do become madcap stocks and all investors who invested in penny stocks become very wealthy. With penny stocks some time they do have high price volatility thus they do give huge returns or losses.

Sometime this volatility in penny stock draws investors attention and they invest with huge volume which they can not invest in large cap due to high price value.Yes their are huge risk involve with penny stocks rather than buying bonds or mutual funds or blue chip stock, but on the other hand returns are very high in it. "NO RISK NO GAIN"

Most of the companies have huge loans due to that they tend to give more losses than giving profits. Their are so many ways one can make money from penny stock investments. Promotional Stocks , These issues may or may not have much actual value. Promoters generally create interest in these types of stock to move the price higher. Promoters generally have huge stake in co. share, so they tend to make more money as long as price is moving up.

 They sell their holding on such price move and generates profits. One they exit all their holding they leave all the investors behind and thus the price starts crashing. Without the help of promoter share price can not be improve. Because of such practice so many investors looses huge amount of their hard earned money. And
such horror stories are added in their life. It is very important to keep an eye on such penny stock before they actually starts moving up and doing so one can earn huge amount of money.

All those investors who ride before such moves by promoters, earned huge amount of money. Technical analysis - Some Investors usually take help from Financial Advisor who uses some technical analysis patterns
and predict such stock before they tend to rise. Moreover such advisors also published daily free share market trading tips , from which investors can take help and can invest in stock markets. Sometimes their are some situations when all technical indicators starts giving positive signals thus stock to trend higher and gives more money on investments.

Fundamental Analysis - It is also profitable to see fundamental of companies, sometimes just clearing of some long loans or some new orders gives huge returns for company and price trend to start moving up.
Instead of of talking only technical analysis help , it is good to take some fundamental analysis which will add some more confidence in investors while investing in penny stocks. Good management means good company and good company means good profits, so investors should look at those stock which have good management.

Sometimes Price of share dramatically. Some times these price decline have nothing to do with fundamentals and more to do with market weakness, interest rate increases e.t.c.Investors can use such situations to invest in these kind of stock because price not falling due to fundamentals. but just because of some overall stock news.

Investing in Penny stocks, sometimes companies change their names very frequently than blue chip companies, In such situations the share will be automatically gets replaces by company and notice will be send to you via mail of SMS. Some times stock exchanges de-list penny stock company. This means you can not sell or buy such shares.
and if the company does not get listed on another exchange then you have 100% loss on such investment.

This is a very rare occurrence,

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