Penny Stocks was something that really fired me up during my younger days. The thought of being able to find the next big Facebook or Google and investing in it during its early stages can really entertain ones imagination. Furthermore the chances of a large increase in profit in a matter of days or at times even hours are convincingly more attractable than the thought of investing money in normal shares for a longer period of time. The information below is an unbiased review of Penny Stocks and is based on facts to help you make a calculated decision in investing in it.
What are Penny Stocks?
According to the Securities Exchange Commission (SEC) penny stocks also known as cent stocks and are securities that are traded under $5. However this definition can vary from country to country as some may claim penny stocks are securities under $3 and others under $1 (example United Kingdom). However they all have one thing in common, they are much riskier than other stocks.
What makes Penny Stock risky?
1. Lack of information to the public- The key to a successful investment is the abundant accumulation of necessary information. Penny Stocks are not legally required to file with Securities Investment Commission (SEC). Therefore obtaining information from credible resources is hard to find.
2. No minimum standards- Minimum standards are security to investors and a benchmark for companies. Penny stocks do not have to meet any minimum requirements in order to stay in exchanges. And in some circumstances it is the reason why some penny stocks are available. Example : When a company cannot maintain its position in major exchanges it shifts down to these exchanges.
3. Lack of history- Most companies involve in Penny Stocks are either starting or approaching bankruptcy. Consequently the track records are either bad or none existent.
4. Liquidity- Penny stocks have low liquidity and are one of the major risks looked at by investors. According to Investopedia liquid assets are The degree to which an asset or security can be bought or sold in the market without affecting the assets price. Liquidity is characterized by a high level of trading activity. Assets that can be easily bought or sold are known as liquid assets. Having low liquidity makes it harder to find a buyer to purchase the shares and at times cannot sell unless the price is reduced. Low liquidity levels opens up doors of opportunities for scammers to manipulate stock prices which can be achieved in a few different ways. The most common is to purchase a large amount of stocks, hype it up than sell it after prices have increased known as Pump and Dump.
A famous controversial example of Pump and Dump was the use of rapper 50 Cents Twitter to cause extreme hype of penny stock (HNHI). This obviously led to an increase in the price of the stock. Coincidently 50 cent had invested in 30 million shares which resulted in $8.7 million in profit.
How to increase your chances of success
I am not going to sit here and write that you cannot make money at all with penny stocks. There have been numerous amounts of success stories of traders and in reality you can be one of them to, if you really put your mind to it. Knowledge is power and is one of the major keys to success. The more knowledge and understanding you can accumulate the greater your chance is of breaking through. There is a proverb that states that those who receive instruction are wise. Obviously you just dont receive any instruction from anyone but what better person to get counsel from than people who have already been there.
Tim Sykes is one of the biggest names in penny stock investors and is a multi- millionaire because of it. He now runs a course and teaches his students how to profit through penny stocks by duplicating his blueprint. The course has had many testimonials and his students stock picking percentage average is over 60% so thats pretty good. The course costs only around $5000 or so! Whos got five grand to spend on training when you could be investing in that right?
TIP : FORUMS
Stock trading forums such as Informed Trades provides training platforms to help people learn the fundamentals and essentials in investing in stocks. And the best thing about is that it is FREE. Some people even claim that all that is in Tim Sykes Course can be learned from Informed Trades platform 😉
Statistics convey that majority of people lose money investing in Penny Stocks. A lot of people gamble and Im a big opposition of gambling so if you are reacting based on emotion than its a big NO NO.
However if it is really in your heart to pursue penny stocks trading than go for it! Just make sure you put the time, commitment and effort to first gain the knowledge and understanding instead of just jumping the gun!
Investing in shares cost thousands! Especially if you want to quit your job and make it a lifestyle.
If you are looking for a quicker, cheaper and more secure way of creating a lifestyle than my advice is learn how to make money on the Internet.