Statistics show that novice investors are beginning to prefer penny stock investment more than chasing after expensive blue-chip and me...
Statistics show that novice investors are beginning to prefer penny stock investment more than chasing after expensive blue-chip and median-priced stock. Penny stocks are by no means a new concept and professional stockbrokers have been trading in penny stocks and reaping massive profits in the process. However, this trend among private individual investors is new and does pique one’s curiosity.
One of the factors, or rather people, responsible for this growing trend is Timothy Sykes. He has made penny stocks “accessible” to the masses by explaining the concept in thorough detail. Today, we’ll talk about penny stocks in general and how Tim Sykes can help you make a profit through investing in penny stocks.
PENNY STOCKS EXPLAINED
When the term “penny stocks” first came around, it strictly referred to stocks whose share price was in pennies i.e. nothing above 99 cents. Today the definition has been expanded to include stocks whose share value is priced at $5 or below. To be fair, if you compare $5 to the prices of some of the blue-chip stocks listed on the exchanges, one could say that $5 might as well be “pennies to the dollar”.
Such a low share price allows investors to hold a much larger volume of shares. You can have massive holdings and still ensure your investment portfolio is diverse. Let’s say you have $10000 to invest in stocks. If you invest in something like Google, for example, which is priced at a whopping $1480, then you’d only be able to have a total of 6 shares in your portfolio.
Let’s say you only buy two Google shares and use the rest to invest in something like Apple. With a price of $318 per share, you could buy another 22 shares. That means the total volume of your investment portfolio would be 24 shares. Also, with two companies in the portfolio, diversity is severely lacking. All of this doesn’t make for an impressive portfolio, to say the least.
In comparison, if you were to invest in penny stocks, which can be priced at something as low as 70 cents at times, you could have massive holdings in multiple stocks. Penny stocks also hold a lot of potential for profits. Statistics have shown some penny stocks to have achieved a growth of 2400% over a period of two years only. With a $10000 investment, you could have a $240000 return in as little as two years.
While the chance to hold a large volume of shares and make big profits seems very appealing, one should understand that penny stocks do have a significant amount of risk associated with them. These companies usually have gone through their IPO recently and are in the stages of infancy in the world of listed companies. As such, they are prone to collapsing just as much as they are to succeeding.
HOW TO MANAGE RISKS
The best ways of mitigating risks associated with penny stocks are to be constantly vigilant of the companies you have invested in and being diligent in analysis. You need to regularly analyze your portfolio and periodically review the performance of the companies you’ve invested in. In this exercise, some of the key factors you would be looking at include revenue, profits, losses, business strategies, regulatory compliance, marketing strategy, and customer reviews.
These are some of the main factors that can affect a company’s share price. Considering that these companies are in the infancy stages of their public status, even the smallest fluctuation in price can lift public trust and the stock can come crashing down. As such, these companies can’t really afford to make a mistake in any of these areas.
This is why you need to be constantly vigilant with your portfolio and check the performance of the companies. While the share price will tell you whether the stock is going up or down, looking at the performance of these companies and keeping an eye on key factors will allow you to make predictions as to when you should buy and sell.
The best strategy you can adopt as a private independent investor is called the “buy and hold” approach. After you’ve bought a large block of penny stock shares, you hold on to the block until it reaches a decent share price and you can sell the block for a profit. Your vigilance should not be compromised if the price keeps going up as the stock can take a turn for the worse and start dropping suddenly. This is also an equally effective indicator for one to sell the stock.
There’s not really much more you can do with penny stocks as an independent private investor. Short-selling is too complicated and requires full-time analysis in real-time. The only way you can make a profit from short-selling is through day trading and that’s a full-time job that requires extensive training. Large scale investments, like index funds, are also not an option as there is no separate index for penny stocks (even though there should be).
Education goes a long way in the world of stock trading. Through educating yourself you can achieve the necessary tools to make a profit through trading in stocks. There is no exception when it comes to penny stocks and, in this regard, no one has played a bigger role in the world of penny stocks than Timothy Sykes. If you subscribe to his programs, you get access to an extensive video library containing lectures on a wide variety of topics including investing in penny stocks, investment strategies, stock market analysis, regulatory compliance, and taxation.
You even get live updates on certain key stocks and alerts regarding market trends and interesting articles. To learn more about Timothy Sykes and his programs, you should check out a review of him titled “Tim Alerts Review – What You Need To Know Before Signing Up”.
Penny stocks can go a long way in giving someone satisfaction as to their investment portfolio. However, penny stocks come with a lot of risks as we’ve mentioned above. As such, it pays to be vigilant and carry out regular analysis of your portfolio. With a little bit of discipline and education, you can also make a decent investment with penny stocks and create a small nest egg for you and your family.