Penny stocks represent an area of the market that some people will not touch at all. But for others they can give the chance of getting a high return on their investment. Of course they can also be fraught with danger, and for this reason you need to think about which penny stocks will be the best ones to invest in.
Penny stocks get their name from the fact that they are low priced. Many of them are worth just cents each – oftentimes less than a dollar. This means that even the smallest investor can buy plenty of shares in a company that has penny shares on offer. The trouble is that these shares are more volatile than those on the main stock market. This is not to say that all other shares are safer and will always guarantee you a profit. It just means that penny shares are usually associated with companies that are fairly new or not of a large size.
This makes it even more important to choose the best ones to invest in. The market capitalization of a company can be an indication of which ones to opt for. This is discovered by multiplying the price of the share by the number available. The resulting figure needs to be quite small in relation to other companies to qualify it as a true penny share. But of course different people have different ideas on what limits to work to.
In addition to this some will happily trade in shares that are less than five dollars apiece. But for others the only true penny share is that which does not go above a dollar in value per share. You can see that there is no one definite stock that makes for the ideal investment.
Some of the information that will help you decide which ones to invest in comes from other sources as well. It doesn’t always come down to pure figures. You need to look into the background of each company and decide whether they are about to get bigger and achieve more success. If you think they are then they could be worth investing in. Otherwise you may wish to look elsewhere.
In short everyone has their own methods for finding the best penny stocks to invest in. What is your method? If you don’t have one, now is the best time to figure one out.
Next, check out our list of best stock picks that have made huge gains. Your #1 spot for small cap stock picks.