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Are penny stocks good?

Every investor dreams of getting a good return, but to do this you have to determine whether the stock is simply a “flavor of the day” or has long-term upside potential. Even if you plan to invest just a few hundred dollars, the following tactics will help you invest in good penny stocks@ http://smallcapfirm.com/<br>

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Are penny stocks good?

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  1. Are penny stocks good?

  2. To be able to decide if a penny stock is a good investment choice or not will depend on your evaluation of the stock for its risks and rewards. Not every penny stock is created equally. Every investor dreams of getting a good return, but to do this you have to determine whether the stock is simply a “flavor of the day” or has long-term upside potential.

  3. Even if you plan to invest just a few hundred dollars, the following tactics will help you invest in good penny stocks: Limit and Diversify: You may get excited about your favorite penny doing well, but you must protect yourself. You can cap losses by keeping your holdings to no more than 2% of your total portfolio. Depending on your appetite for risk, you should also consider diversification of your penny stock portfolio. This should not exceed 10%.

  4. Monitor trading volumes and liquidity: Even if a penny stock is giving you favorable returns, you still need to be able to sell its shares. To do this, the stock must have enough trading volumes and liquidity. Otherwise, you will end in a place where there are very few buyers and a widely distributed bid-ask spread. This will make it impossible to convert paper profit into something monetary. Timing: Knowing when to sell a penny stock is the key to success. Most penny stocks rarely become a buy-and-hold investment for a long term. This sector thrives on short-term trades, so knowing when to buy and sell is crucial. If you’ve already obtained sizeable gains from a particular penny stock, book them in now instead of waiting for a bigger payout. In reality, this may never occur.

  5. High-quality Stocks: Some penny stock companies will be better investment choices than others. Ventures that are set up by experienced managers who successfully left a previous company and stocks that have binomial outcomes are both good choices. Several tech stocks that are trading today once traded in the single digits. Nontech stocks like La-Z-Boy Inc. (LZB) and Citigroup Inc. (C ) also traded for less than a dollar in March 2009.

  6. The Take Home Message: Some penny stock companies are more valuable than others. Nevertheless, all penny stocks are a risky gamble. The only way to invest in a good penny stock is to find a company with a strong track record. If you want to commit some money to speculation, choose companies that trade between $3 and $5 per share.

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