Investors invest in penny stocks for variety of reasons. One reason is that these stocks are cheaper on a per share basis than the big company stocks, often less than $1 a share. Another reason would be that penny or small-cap stocks also have their own trading exchanges, stock brokers and media resources. So, investors still have access to similar sources of information as the bigger companies do in terms of doing research, following trends and making a killing in the market.
However, there are so many things that can and will go wrong with penny stock investments. It is very important to avoid these mistakes so that it is you can make bigger profits instead of getting wiped out by the market.
#1 – Doing Little Or No Research
The first and biggest mistake you can do with penny stock investments is not doing as much in-depth research as you possibly could with your available resources. It cannot be overemphasized that these stocks are one of the riskiest investment due to many reasons. The most important one is that some sources of company information may not be reliable. Always do your due diligence (fancy phrase for ’solid research‘) about the company, about the industry and about the trends so as to avoid falling victim to bad penny stock trade.
#2 – Relying on Insider Information
The Internet is a double-edged sword. On one hand, you have Internet sites that provide reliable education and information about penny stocks. On the other hand, you will encounter sites offering insider information about certain penny stocks. Well, this is one of the gravest mistakes you will ever make – relying on insider information. Instead, you should always double check the data and information coming to your lap. This way, you can make better investment decisions.
#3 – Taking It Easy
Many naive investors think that penny stocks investing is an easy way to rake in the cash. This could not be further from the truth. In fact, many an investor has lost money on penny stocks by taking it easy, just plunking in the money without rhyme and reason and then waiting for the profits to fall into his lap.
You have to put in your fair share of the work, just like you would with mainstream stocks. Do your research, watch your investments closely, formulate an entry and exit plan and follow the trends.
A Bonus Mistake – Investing Everything
To paraphrase an old adage, you should never place all your money in just one type of investment, especially not with penny shares because of the high risks involved. The penny stock market is so volatile that you can lose all your savings in a day of trading.
To avoid this sad turn of events from happening, you should make sure that these small-cap stock investments are just one part of your total portfolio. Many experts recommend setting the limit at 20 percent although we recommend it to be at 10 percent. At least, you can still afford to say goodbye to 10 percent instead of saying goodbye to a hundred percentImmobilienmakler Heidelberg Makler Heidelberg
Source by Mike Singh