People often say that the best way to earn money in the stock markets is to buy penny stocks. Broadly it is a good idea because if you buy penny stocks then you will get higher returns within two or three quarters. But if we look deep inside it then it is not absolutely true because it contains many hidden issues which can make your whole investment a troubled issue.
The penny stocks will move very quickly with the movement in the overall market. However the low cost of the penny stocks will prompt you to buy more shares but it must be understood that any major fall in the overall market can devastate the total value of the penny stock. The penny stocks are quite unpredictable in nature.
The major issue when you buy penny stocks is that the penny stock market is not regulated like NASDAQ and that’s what makes trading with them more risky. The lack of any regulatory authority increases the threat of illegal activities making it even more risky to tide in penny stock market. However, some of the penny stocks are listed on the major exchanges also and trading in them would be a safe bet.
The practice of pump and dump is necessary while you are going to buy Penny Stocks. Shady individuals and groups will drive up the cost of stock through manipulation and they will sell their shares and also they will cause all others with worthless stock.
The interested group spreads tempting information about penny stocks to lure the innocent people who are not so well-informed about these companies and stock market, to buy these stocks. For wide publication of false and manipulative information they use spam, different publications and message boards as these can easily reach many people and does not cost much. The sum total of these manipulative practices results in pushing up the prices of these worthless penny stocks and once prices sufficiently go up, these groups off load their holdings and earn huge profit. Just after that due to lack of provocative information, prices of these penny stocks reach their bottom again and those who invested in them are left with worthless piece of paper.
Although you are bearing in mind to buy penny stocks with a trustworthy company, there are still other dangers. The chief hazard is that penny stocks are inclined to shift swiftly either upwards or downwards. Profit could be little or huge, but both ways it needs a lot of idea about the stock market trends in order to sell at the correct instance.
The right time is very important to get profit out of your investments. So you should consistently monitor your investments for the best results.
When choosing to invest in penny stocks, there is less room for error than with traditional stocks. Making the decision to buy penny stocks will either make you money or lose the money that you invested. It is important to be aware of the decision you are making by investing time in addition to money.
This means that you have to regularly keep checking how your stocks is performing you also have to be in touch and aware of what is going on in the rest of the market. Also it is important to know what is happening with the industries which may affect the performance of your shares. Naturally you will be required to spend a lot of time on computers for doing all these. To get the success as a penny stock broker, it is essential to devote time for this purpose.
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Topics: Stocks Mutual Funds | Comments Off
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Guest, Guest "How To Buy Penny Stocks – Your Useful Guide." How To Buy Penny Stocks – Your Useful Guide. 22 Jun. 2010. uberarticles.com. 1 Aug 2014 <http://uberarticles.com/finance/stocks-mutual-funds/how-to-buy-penny-stocks-your-useful-guide/>.
APA Style Citation:
Guest, G (2010, June 22). How To Buy Penny Stocks – Your Useful Guide. Retrieved August 1, 2014, from http://uberarticles.com/finance/stocks-mutual-funds/how-to-buy-penny-stocks-your-useful-guide/
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Guest, Guest "How To Buy Penny Stocks – Your Useful Guide" uberarticles.com. http://uberarticles.com/finance/stocks-mutual-funds/how-to-buy-penny-stocks-your-useful-guide/
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