The instant huge profit is the main reason why lots of people starting to circulate their money buying stocks. But it is important to know that it is true that investing in stocks can make enormous gain but it comes with enormous risks too.
This makes the popularity of penny stocks is increasing among the young or beginner investors since the price per share of penny stocks are relatively cheap. But, what are penny stocks? Unlike the name, actually penny stocks are stocks that traded below $5; even there are lots of $1 stocks to buy now. They are not listed on major markets; instead the penny stocks transaction is occurred in Over the Counter or OTC markets.
Investing in penny stocks is a little trickier than investing in common stocks that sold on major markets. What makes penny stocks cheap is because the public companies that release it are usually still small or on start-up level. They also still have a little cash and revenue.
So, it is a little harder to decide which stocks to buy since unlike the bigger company, these companies are still unstable and tend to have a big loss or even bankruptcy. However, the possibilities of those companies are able to kick their way out and successes, which automatically will raise their stocks price, still exist. So, before deciding to buy a penny stock, there are things that must be considered.
Who are they?
Researching the company is the most essential and basic things to do before buying their stocks.
What company they are, how are their financial status and report, who is the head of the company are questions that must be asked.
This kind of information is important in order to predict the future of the company. Take an example when the company is a biotech company which has a high possibility that it is needed on the future. It will have higher chance to develop and raise the stock’s price. As well as for the CEO of company, if the CEO is capable and experienced, the company will easily develop in the future. The information that also essential is their financial report.
Don’t invest to the company that has a lot of debt. Their progress may seem good at beginning, but it can experience a massive hit in the future. This kind of company is good for short selling since its stocks is promising in their earlier day. Even though, the value of their assets also can be taken as consideration. If their debts are much fewer than their assets’ value, then it is considered safe to invest.
The volatility and volume
Being a penny stock investor, the price stock’s volatility can be an important indicator. The one that moves slowly or the trending is down shall not on the option of buying. It means there is no or few activity of the stocks, so the buyers and sellers will be only few available. This makes hard to take a huge position or finding a buyer if it is needed to sell the stocks. Whether it is up or down, the volatility of a stock still is a good indicator.
Besides the volatility of price stocks, its volume also must be taken as consideration before deciding $1 stocks to buy now. Volume is the amount of shares that traded on certain days. The higher the volume means the interest of the stocks is high. It means there are no difficulties to find the buyers or the sellers of the stocks.
Keep the news updated
A certain event or news about the company can drastically affect the stocks. In the business terms, it usually called catalyst. A product innovating or release can be taken as example. This can have big effect on the company stocks. The sales report, mergers and any news about the company can make impact as well. Avoid investing in the company that is low-profile, which means there aren’t much information and news about them. So, scouting the company development and news is also important for deciding which $1 stocks to buy now.