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How to do well with penny shares
The Deal With Penny Shares
Penny shares are either potentially about to be removed from the major stock exchanges due to low share price, or are already being traded over the counter (OTC). Many new investors get over enthusiastic about stocks because they hear about exciting penny share picks often sent out via a paid subscription service, imaging becoming a bigtimere with the next Intel or Apple. The truth is that trading in penny shares can be very exciting, but can be costly.
Most stocks on the OTC market are there because they cannot meet the stringent financial requirements of the NASDAQ and NYSE. A company might take it upon itself to trade its stock over the counter, in this instance it is usually to be because they cannot meet these more rigorous requirements of the common markets, or alternativly because they do not want to go through all of the red tape and transparency that is required of listed companies.
Other companies begin on the NSADAQ or NYSE, but encounter problems in finances or paperwork that result in them being removed from these exchanges.
Because of the above penny shares are the most volatial of stocks. Their performance is unpredictable, lack of information and stability are two common problems you will encounter when trying to forcast the future performance of penny stock.
That being said, at such low prices, penny stocks are still very interesting.
Recently there has been a penny share success story with a well known brand.
In late 2008, the majority of the main American care companies were going through difficult times. The price of Ford had fallen severely, and was priced at $1.58 a share - deep into penny stock range. However, within a year, the stock price jumped, exceeding $12.00 .
That means, should you bought $5k of Ford stock in November of 2008, you would have bought over 3,000 shares, just over a yeat later the total value of this buy would be nearly £38k.
Bear in mind that many penny stocks never make it out of the penny stock marketand for others the only route out is through bancruptcy at which point the stock becoming worthless. But as with anything profitable, with the potential gains come great risk.
Dispite the warnings contained above if you have the right information to hand trading in penny shares can, as you will heve seen, provide huge rewards.
There are some good online resources with detail on penny shares, the one linked to in the previous sentance provides access to a weekly email which contains (what I have found to be) some fairly profitable picks.
Have a look, it will help you sort the gold from the coal!
Send E-Mail to: penny7shares000@yahoo.co.uk
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