Penny stocks are definitely risks that are better suited for the investor that likes to go skydiving, skinny-dipping, and bungee jumping. Of course even a few more conservative investors will find some attraction in the low risk promise of hefty payouts that the right penny stock can offer. In fact, many investors dream of being the one to find that perfect penny stock with absolute potential that will someday become the next LDDS turned WorldCom before the fall. The truth is that little businesses become big businesses everyday. Unfortunately, those that make it to the big leagues are quite few in number when compared to those who do not.
Penny stocks are a great way for small companies to finance growth spurts, smooth over rough spots and manage to become even better. This also gives companies a chance to restructure and by allowing their stocks to be traded as penny stocks they are generating revenue that can be reinvested into the company to great effect. Many times, this is a successful venture for the company but there are many times it isn't. This is part of the risk that is taken when investing in penny stocks. When the companies manage to pull themselves together, grow at an exceptional rate, and become the company you hope they can become the payouts are amazing. But do not expect immediate results from your penny stock investment.
You should also be aware that many companies use penny stocks in order to run scams on unsuspecting investors. It is nearly impossible to get all the particulars about penny stock companies when investing in penny stocks because unlike those companies that trade with the big boys (NYCE, NASDAQ, etc.) these companies are not required to open their books to potential investors and do not face nearly the same amount of scrutiny that larger corporations face when opening their doors to investors.
But the question of whether or not penny stock trading is for your is going to depend almost entirely on your personal sense of adventure and your willingness to take risks with your money. There are many out there who firmly believe that in order to gain much, you must also be willing to risk much. This is a way of life for many that holds true for them in love, life, and in money. These people are much more capricious with their money and are willing to take the risk without reservation or fear of a negative outcome. These are the people who do wonderfully, win or loose when investing in penny stocks.
On the other end of the spectrum there are those who jealously guard their nest eggs and bank their retirement security upon the funds going in that basket. These are people that are quite likely to find themselves panicking their way through a penny stock investment for many reasons. You can't really research the companies (a travesty to people who prefer careful planning) and you can't gain quick and easy access to your funds once invested. This removes some sense of control over you financial health and isn't a comfortable feeling for investors who like to feel in control. I can definitely relate to those who are in no condition, really, to invest in penny stocks. It's a frightening investment practice when houses, retirements, braces, and college educations are on the line.
If you are the type to invest in penny stocks without carrying the heavy baggage of worry, stress, and nervous sweats along with you then you may find yourself in the position to change your wealth status. Even if you go against your comfort level and make the investment there is much to gain. Unfortunately the risks of this sort of investment are great as well and should not be overlooked or underestimated. So it still boils down to you and the person you are deep down inside. Are penny stocks right for you? Only you can answer that.
Penny Stocks can be a very effective way to provide you with a secondary income. They can be used to create passive income because they do not require you to be constantly watching over them. The problem that most people have when it comes to stocks is - not knowing the right time to sell.
Penny Stocks can rise very quickly but they can also fall quickly too. The reason that most investors hold onto a stock is because the fail to separate their emotions from their actions.
All of your penny stocks buying and selling should, of course, be based on sound research both of the market and the companies recent history. How the company is doing in terms of profitability, whether they are just about to, or have just announced profits, losses or new patents, discoveries and products, can all affect your decision on whether, or not, to buy.
Knowing the right time to sell your penny stocks however can sometimes seem, as much an art as a science, although getting it wrong can be fatal. Many people seem to put all their research efforts into knowing what penny stocks to buy and when to buy them.
Investors seem to forget about researching to sell stocks. Instead, they let their emotions take control and sell at the wrong time. Investors selling at the wrong time fall into two categories. These categories are, The Runners and The Sitters.
The Runners like to take profit way too early. They see their Penny Stocks rise a little and sell because they don't want to risk too much. I've seen it time and time again; these people set out to earn a 25% Return on Investment and end up taking profit at 1%. Someone who takes profit twice at 25% earns a lot more than someone who takes profit twice at 1%. Usually, as soon as they sell a penny stock, it will rise even further and they'll be wondering why they sold so early.
The Sitters are the heavily emotionally involved in their penny stocks. They are gamblers at heart and just do not want to let go of a losing position because it could bounce back any day now. When they do let go of their Penny Stocks - there is virtually nothing left. The sitters like to sit on a losing position. They like buying but dislike selling.
Do you want to be a Runner or a Sitter? Well, I hope you are neither. You want to be a winner. A winner will separate their emotions from their investment thinking and will also research when buying and also when selling. They will buy and they are not afraid of selling.
There is great deal of profit to be made from trading in Penny Stocks. But you have to know not only what to buy but also how long to keep it and when the best time to sell. The answer, as with most things in the world of finance, is good information and research. But that doesn't end when you buy. Find out why your penny stocks are rising and this will put you in a much better position to know when to sell.
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