4 Tips on How to Win with Penny Stocks
If the idea of investing in penny stocks sounds alluring to you, here are 5 pieces of investment advice that could mean the difference between making profits and losing your shirt in these hectic markets…
1. Don’t Get in Over Your Head.
When you see a hot penny stock that’s ready to take off, it can be hard to keep from cashing out your 401(k) to buy as many shares as you can, but getting in over your head with penny stocks is an almost sure way to get burned. Even though penny stocks can make you some serious money, they’re volatile — and that means you shouldn’t put more than 10% of your portfolio on the line.
What’s the smart penny investor to do? Set up an account (or a section of your main brokerage account) for just penny stocks and load it only with money you’re prepared to lose.
2. Get Good Financial Advice
There are hundreds of web sites giving stock research and advice, and they range in quality from stellar to awful. Be especially wary when researching penny stocks online. Many so-called research reports are thinly disguised sales pitches. Get your penny stock advice from ExclusivePennyStock.com and other websites run by knowledgeable financial professionals and respected investment editors.
3. Analyze the Penny Stock
It can be tempting to jump on board with penny stocks, especially when you get a glossy brochure or fancy investor’s report in the mail. After all, the stock costs next to nothing, right? The dirt-cheap prices of penny stocks make them a real temptation. But not all penny stocks are going to go up in share price. Most, in fact, probably won’t. The solution: buy based on solid research provided by an equity research firm you trust. Perform your own due diligence by reading their reports, then make up your mind.
4. Don’t Get Greedy.
Lots of penny stock investors see 200%, 500%, even 1,000% gains on a stock but still end up losing money in the end. It’s not because they didn’t plan their buys properly…it’s because they got greedy! It doesn’t matter how much money a stock makes if you’re not ready to press the button and realize those gains. That’s why you need to set solid exit points for any penny stock you buy.
It’s human nature to want to hold onto an investment as you see it climb with no end in sight, but doing that is a great way to miss out if that trend turns around. When you analyze an investment, think about a logical exit price and sell for that. Picking solid exit points will become easier as you develop your investing chops.