Penny Stocks – The Future of Trading

Published November 30, 2019

Nowadays, the prevailing thought is that if you want to make big money from the stock exchange, then you need an insane amount of money to either short-sell trending stocks, or buy a large volume of blue-chip stock and enjoy the dividend. However, such thoughts form a larger collective misconception and our article will help in disproving this line of thinking. 

“Penny Stocks” are a great way to invest your money and get a large return, provided you follow the tips we discuss in our article below. They’re also a great way for you to diversify your portfolio and have larger holdings in listed companies. 

Today, we’ll discuss what penny stocks are and the different investment strategies you can implement to ensure you make a maximum profit. However, it should be noted that penny stocks aren’t an easy way to get rich and neither is it some form of lottery that will promise you millions. As is with any other type of trading, a certain level of skill and hard work are required. Luckily, this article is enough to get you started.

So without further ado, let’s go! 

PENNY STOCKS EXPLAINED 

The term “penny stocks” refers to stocks whose share prices are listed at $5 or below. Traditionally, the term included only stocks whose share price was literally in pennies (under $1) but with the passage of time the threshold has come up. The terminology still applies as even a $5 stock is “pennies on the dollar” in comparison to some of the blue-chip stock available in the market today. 

There’s also a very high chance of profit as the potential for growth of penny stocks is quite abundant. Companies issuing these stocks are in their initial phases and have just gone through their initial public offering. As such, the company has a lot of room to grow and rise in value, sometimes even at a very alarming rate. Some penny stocks have ever experienced as much growth as 2000% over the period of two years or less. 

In addition to the potential for growth and chances for high profits, penny stocks also allow for you to have a large holding for a relatively little amount of money. If we were to lean more towards the traditional definition of penny stocks and invest in a $1 stock, you could have a holding of 10000 shares with an investment of $10000. Compare this to blue-chip stock such as Apple which, with a share price of $208, would give you less than 50 shares with the same amount of money. Google, which is valued at $1211 would give you an even smaller holding. Also, even if you had a growth of 1000% over two years (half of that in the example mentioned above) then you can turn your $10000 investment into a $100000 return. Apple and Google wouldn’t give you that percentage of return in the same amount of time. 

However, penny stocks are subject to the same risks as other stock and maybe even more so because of the company’s young age. One can mitigate these risks through the regular market and stock analysis and following the company’s progress. Some key factors to look at are a company’s profits, losses, business practices, and marketing strategies. One misstep in any of these could result in adverse consequences for the company and one should be vigilant about the same and invest, or divest, accordingly. Constant vigilance can go a long way in mitigating risks, not only with penny stocks but with trading in general as well.

INVESTMENT STRATEGIES

There are several investment strategies one can implement with penny stocks, depending on the nature of the investor and how the portfolio will be managed. If you’re a private investor who will be managing their own investments, then the best strategy would be “buy and hold”. After purchasing the stock of your choice, you hold on to the block of shares for a set period of time and allow the share price to grow while keeping up with your analysis as explained above. Once the stock price reaches the desired level, you then sell the block in the market for a profit. 

Alternatively, you can try going the short-selling through day trading route, but as a private investor only investing in stocks as savings, you wouldn’t have the time or expertise to short sell. This strategy requires constant vigilance and full-time analysis, with a keen eye for market indicators. Even the slightest disruption can drive the share price and when short selling, even a few cents make a huge difference. The best way to implement this strategy is to acquire the services of a broker who deals in penny stocks and let them manage the portfolio. However, in exercising this you’ll be giving up control of your portfolio and you’ll have to pay commission as well.

Unfortunately, any large scale investment, like index funds, is not a possibility with penny stocks. There is no separate index for penny stocks and the different views on the definition of the term have made it harder for a private fund that could differentiate and limit which stocks could fall into the category of penny stocks.

KNOWLEDGE IS POWER – THE TIMOTHY SYKES REVIEW

While constant vigilance and analysis do make all the difference in the world, educating yourself can also go a long way in helping you profit from your trades in penny stock. Without a doubt, the guru for penny stocks is Timothy Sykes, who has produced a range of educational videos that touch upon a range of topics including the basics of penny stocks, stock trading, investment strategy, stock analysis, market reports, taxation, and regulatory compliance. There’s also the Timothy Sykes Millionaire Challenge, which not only provides all the educational videos but also provides tips on trading and articles dealing with different aspects of the market. You’ll also get live alerts with stock tips, giving you an edge over your competition. To learn more about Timothy Sykes and his programs head on over to https://baltimorepostexaminer.com/timothy-sykes-scam-or-a-trading-guru/2019/10/27.

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