Most investment experts will say that good penny stocks are the stocks that pay off. So that begs the question, how does someone find a good one. This can be particularly difficult because penny stocks are a bit different than the average stocks traded on places like the NASDAQ or the Dow Jones stock exchange. However, even though there are a few challenges that come with penny stocks, there are ways to maneuver this tricky, albeit potentially profitable, market.
The first challenge is to verify the company behind the stock. This is a bit more difficult with penny stocks because most of the exchanges where a person can buy and sell penny stocks either require no financial reporting, or their financial reporting standards aren’t very stringent. This means that the investor is going to have to do a fair amount of legwork on their own to determine the financial health of the company.
This is important, not just to make a good investment, but it’s important so that the investor doesn’t get scammed out of their money. There are many penny stocks that have no company, no products or no services. Many times, penny stocks are available for companies that don’t actually exist. Without financial reporting, it may be difficult to determine if the company actually exists, and if it does, if it provides any products or services to the consuming public.
The good thing about these stocks, outside of their relatively low value, is that there’s a great deal of volatility. This can be a negative thing, but it can also work in an investor’s favor. These stocks are subject to wild shifts in value. This may mean a stock could plummet in value in just a few short minutes. However, it also means that they can skyrocket in value in the same amount of time. This is perhaps one of the most appealing aspects of penny stocks.
There are a number of different minefields to navigate when it comes to buying these types of stocks, but the potential for profit is so good, and the buy-in price is usually so small, that it keeps investors coming back time and time again. If you want to maximize profits without spending a great deal of money, even though there’s inherent risk, penny stock may be exactly what you’re looking for.