With the passage of time, more and more novice investors are turning towards penny stocks to begin their journey of investment in stocks. While penny stocks are not a new concept, with professional stockbrokers trading in penny stocks since their inception, independent private investors have recently started to make the foray towards penny stocks.
One of the reasons independent private investors are more interested in penny stocks, is because they've been made very popular by a man named Timothy Sykes. He has managed to explain the concept very well to his students (explained more below) and has made it possible for more people to make profits while investing in penny stocks.
WHAT ARE PENNY STOCKS? THE ADVANTAGES
Traditionally, penny stocks refers to stocks whose share price is in pennies. Today, the term's definition has been widened and it also refers to stocks whose share price falls in $5 range. Even though $5 couldn't be considered a "penny" stock per the traditional definition, one must accept that when compared to the price of some blue-chip stocks, $5 might as well be "pennies to the dollar".
The low price of penny stock shares translates to an ability to hold a much larger volume of shares. Your portfolio would also be a lot more diverse and would hold a bigger volume than it would if you were to invest in higher priced and blue-chip stocks. Let's say you have an amount of $10000 to invest in a stock portfolio. If you were to buy Google shares, which are valued at a whopping $1480, you would only have 6 shares.
Let's go a little lower and consider the share price of Apple stock, valued at $318. Your holding would be a bit stronger with 31 shares, which still isn't impressive. By comparison, the most expensive penny stock, valued at $5, would let you hold 2000 shares. The lower priced shares will give you even bigger holdings and if the company takes off, you'll be looking at decent profits.
Speaking of profits, you should know that penny stocks have a high potential for profit and growth. The companies issuing such stock have usually gone through their IPO recently, and these companies could either take off or collapse into the ground completely. With this high risk comes the higher chance for profits and this has been evident as some penny stocks have achieved 2400% growth over two years. If we were to take the initial investment of $10000 mentioned above, you would have $240,000 to your name after two years.
MITIGATING RISKS
As mentioned above, the potential of profit for penny stocks is quite high and, as such, the risk attached with investing in penny stocks is equally high. The best way of mitigating this risk and minimize losses is to regularly and thoroughly analyze your portfolio and the companies contained therein. The key factors which you must always keep an eye on include revenue, profits, losses, business strategies, regulatory compliance, marketing strategy, and customer interaction.
All of these above-mentioned factors can have a profound impact on the company, which in turn will have an impact on the share price, especially when you consider that these companies are still in the infancy stages of their public status. One small mistake by the company in any of these aspects could cause the share price to fluctuate heavily and even experience a significant drop.
As such, it is absolutely vital that you stay up-to-date with your portfolio and carry out regular analysis on your investments. Constant vigilance is what will provide the strong foundation that is needed when one starts their journey into penny stocks.
INVESTMENT STRATEGIES
If you're a private independent investor, then your best bet with penny stocks would be to adopt the "buy and hold" approach. You buy a large block of shares, which wouldn't cost a lot of money considering the low price of penny stocks, and you hold on to them for a period of time. Once the stock reaches a decent share price, you can then sell it in the market and enjoy the profit. Your analysis shouldn't be compromised simply by the rising price though. If the price starts to sink again, that's also an indication for you to sell in a timely manner.
Professional stock brokers adopt a much more complicated and intense strategy for trading in penny stocks. Through day trading, professional stock brokers continually short-sell penny stocks. This approach is complicated due to the constant in-depth analysis, which is in real-time and the decisiveness required to make tough choices under strenuous circumstances. This is the only way you could make a profit through short-selling penny stocks and, as an independent trader you would not be able to give it the time and effort that is required. Professional stock brokers are able to do this because it's their full-time job to do so.
EDUCATE YOURSELF WITH TIMOTHY SYKES
When one starts their journey in the world of stock trading, education is probably the most important tool that will help. There are many people in the industry that will offer courses and trainings, but one man that stands out is Timothy Sykes. Subscribers to Timothy Sykes' programs get to enjoy lectures through a vast video library learning about different aspects of penny stock trading including investment strategies, stock market analysis, regulatory compliance, and taxation.
The Timothy Sykes Millionaire Challenge even gives subscribers live alerts on market trends, along with stock tips and interesting articles. To learn more about Timothy Sykes and his programs, visit https://stockmillionaires.com/reviews/timothy-sykes-review/.
CONCLUSION
As you can see, penny stocks could hold the key to a prosperous and economically comfortable future. However, there is a risk factor involved and one needs to exercise a very prudent approach with their investments. If you are considering penny stocks as a nest egg for you and your family, then you need to continuously carry out proper analysis and be constantly vigilant as to market trends and changes in the stock's activity.
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