Must do Things Before Investing in Penny Stocks

It is one of the highest risk zones for trading in the stock markets and it is mostly traded over the counter, OTC, which leads to concerns on its performance. Just browse the lines to gain complete information on the penny stocks.

But in short, Is Penny Stock Good for Beginners.? No, beginners should never lay their hands on penny stocks. I do have a supporting reason to avoid penny stocks trading as a beginner. 

Nature of Penny Stocks

First, let us check the features of Penny Stocks:

The penny stocks are cheaper for purchase and highly volatile stocks to select for investments. 

No matter, you can buy penny stocks and make extreme short term gains. But contrarily, the same stocks get labeled as bad stock positions in long term investments.  

SEBI’s regulatory system allows companies to disclose financials to a limited extent thus fraudulent companies move ahead to operate scams and entertain deceptive activities. 

Another reason that makes the penny stocks unobserved is the majority of the penny trades route through over the counter, OTC transactions or electronic bulletin board system. 

Penny stocks trade at a low cost per share, some may hold a low price of INR 0.50 per share. A low cost share does attract the attention of investors and many do invest to obtain huge volumes of shares at a little value of INR 100.00. 

These penny stocks maintain upside potential like S&P 500 stocks, or Large-cap stocks. 

And, it is possible that a stock of INR 0.10 paise can reap a profit of 1000 % or a short or medium term.  

Or, you may witness the same share that is unable to touch INR 1.00 per share. 

Therefore, it is this temptation of huge rise in share price for reasons of extreme volatility, traders tend to participate in penny trades. But, it is not advisable for a beginner. 

Always remember, penny stocks do operate on the corporate news, rumors, market sentiments, and momentum and very less attention is paid on the company fundamentals. Hence, it becomes uncertain to detect the stock price after a particular time even by using the technical tools.  

Summary:

Although the price per share is highly attractive, and the option call can enable you to hold huge volumes of stocks, experts suggest not to bang your head on the penny stock charts. Since, earning huge in penny stocks is a rare phenomena.