Choose Viable Penny Stocks In 2012?

Answer 1

Penny stocks are quite popular and are attracting an increasing number of investors worldwide. There is great potential for immediate profit in this niche of the investing community, but there are also a number of pitfalls to be avoided. History has shown that certain industries are to be favored when trading in penny stocks, and individuals who know exactly when to buy and when to sell are far more likely to come out ahead in this specialized investment game.

Over-The-Counter Penny Stocks

Cent stocks are usually common shares of smaller companies, traded on the NASDAQ or OTC Bulletin Board. They have a huge potential for profit but the risks are also great. Because the investment is small, less than a dollar per share, price manipulation is often seen. Millions of these stocks are purchased by investors who then use the internet to drive attention to the stock itself. As the price of the stock increases, the original owner of the stock sells out and ends up making the profit.

Penny stocks generally have a low level of liquidity, and quite often investors have difficulty unloading their shares at the appropriate time. But even with the current attention being given to possible frauds and scams, penny stocks remain a viable alternative to mutual funds or day trading.

Industries To Invest In

Recent history suggests that investors interested in penny stocks are more likely to turn a profit if they spend money in an industry that has true generating power. If an actual product is sold around the world on a constant basis, the risk of trading low-priced stocks is minimal. Oil and gas, precious metals and raw materials are often seen as the best bet for penny stock trading.

In short, the winners in penny stocks over the previous 12 months have been those connected to a revenue-generating business. Shell companies are often seen as a money pit for those promising a future profit from further investing, but most of the investors who turn a big profit from trading low-cost stocks find it safer to stick with those companies that are already producing in-demand services and merchandise.

Avoiding Greediness

Knowing when to punch the button is critical. Many investors continue to buy up penny stocks merely because the price increase is seemingly without end. Nearly all marketing experts recommend the construction of a well planned exit strategy. For every type of industry, experts can pinpoint a logical exit point. This point must be adhered to religiously if the investor wants to avoid consecutive losses.