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The incredible world of penny stocks by ross brian
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The incredible world of penny stocks |
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Business
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Financial world has seen a great turmoil in the recent years and people have started finding faster modes of growing money. Stock market is undoubtedly one of the effective modes, but there are risks and challenges. It needs huge investment and constant attention. Statistics show that hardly two of ten investors are serious players that have detailed knowledge of stock market. Remaining all invest on the basis of market speculations and alerts and tips. However, it is not possible sometimes to invest huge money. Penny stocks are preferred by many people who want to invest less and earn more. However, dealing in these stocks is not a cakewalk and there are risks as well. They are low cost stocks with very high volume. Typically, a stock is termed as penny stock if the face-value is less than 2 USD. Typically the companies listed as penny stocks don't need filling of the financial statements and regulatory requirements for listing. The rules are fairly simple and relaxed for these stocks. Investors are unable to assess the financial situation of the company and therefore, these stocks are risky to deal with. There is no way to find out the reliability and stability of the company. Investment experts, therefore, always suggest thinking twice before investing in these stocks. Nevertheless, the returns are quite well and sometimes 200% or 300% of the listed price. The risk factors: In spite of the fact that penny stocks are good to earn huge money, there are some inherent risk factors: a) These stocks belong to small companies. The financial status of the companies is never known to the investors because they do not follow documentation standards. Investors may get trapped into speculations due to that. b) There is ambiguity about the accounting standards and bankruptcy details. Change of ownership is not reflected sometimes. c) There are very high variations of stock value resulting in high risk and volatility of money. They are prone to market manipulations and "guided" buying or selling. The benefits: There are some good things about penny stocks to make them a lucrative mode of earning money: a) The face-value is very less and therefore, people need less money to invest. Even small and medium investors can also opt for these stocks. b) People can put small stop-loss values for penny stocks. It is better to sell a penny stock to lower the losses if it is going down beyond a limit. c) There are various penny stock alerts and penny stock newsletters available in the market. One can subscribe them and track a few stocks for some time. Careful study of selected stocks gives a definite pattern of movement. It helps in deciding about the right moment of entry and exit. Dealing in penny stocks is not a gamble. Statistical analysis and research can tell everything about the movement of these stocks. In-depth insight, patience and understanding of the market can yield good results. It is true that market sentiments affect them a lot, still reasonable prediction is possible! People can put small stop-loss values for Penny stocks.
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