Are penny stocks worth the risk

Nov 16, 2016
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There are some interesting values in the microcap or even nana-tech space. The OTC or the pink sheet stocks are like the “enigmatic meat” of the investment sphere. You cannot even tell if they are worth the threat because you have no good way of even estimating their risk. Buying stocks to make money is never that easy. You have to be enormouslycautious and do your exploration, to make money in the stock market. It also depends on your personal ability. Penny stocks have more threat than the other stocks related with them such as: possibility of insolvency, possibility of price operation by bigger players and lack of liquidity which might upset you by not getting the right place.

The Risk Part

  1. If you are a good investor, you will be surely looking for value stocks. These are stocks of good reputed companies, but have fallen due to reasons, beyond their control. There is a global recession. The stocks of even reputed and good companies fall, even though they have sound fundamentals. These stocks are now value buys. You need to understand the difference between a value stock and a cheap stock.
  2. In your greed to make money, you may buy hundreds of stocks of a company; just because they are cheap in price. You get good returns from your investment in stocks, only if the company does well and not because you buy hundreds of cheap stocks. You can really make money if you buy a single share of a good blue chip which is of a reputed company, rather than hundreds of penny stocks.
  3. Everyone dears stocks which are inexpensive. A stock costs just INR 9-10 which is really cheap. You can buy amply of such stocks. Visualize if an INR 10 Rupee stock moves up to INR 20? What if you have bought few thousands of such a stock? Can you imagine the profit you can make out of it? The stock price of the company may be low for a reason. Chances may be that the company had suffered losses in its business and this reflects in its stock price.
  4. The companies whose stock prices are performing very well may be a couple of thousands. There is a better chance of the stock of a company which has virtuousrudiments to double, than for this penny stocks. You must purchase the stocks of company which have good fundamentals. You need to hunt for fundamentally sound stocks at the right price and you will make a profit in the stock market.
  5. Just like any other system of investing, penny stocks are “worth the risk” if you comprehend how they alterand trade. The delinquent is, people blindly sign up for the stock promoter email blasts and instinctivelydevote money into these stocks without accepting that they are basically being conned.

Such stock gives you the ability to nurture your assortment exponentially. You might get safety through investing in a nice Mutual Fund or in bluechip stock, but you won’t get giant returns with a small account. If you are going to invest in them, recognize what you are doing and practice

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