Posted on 22 August 2012.
It is easy to disregard penny stock trades. These stocks have exceptionally low monetary value and most of the companies behind them have not even bothered to file with the SEC. They are risky investments because they could fold up and disappear with very little warning. Penny stocks can also be difficult to sell when you want to get rid of them.
However, penny stock trades attract many investors due to these risks and the inherent volatility of the share prices. Any good investor knows that there is little to be gained when there is no risk involved in an investment. Penny shares have low prices but this allows them to create immense returns on very small investments.
As an example, consider imaginary shares that are worth 40 cents each. A rise in value of just 10 cents would create a 25% return. If you had invested $40,000 in that stock and purchased 100,000 shares, then your profits would be $10,000. This could happen in the course of just a few minutes. It is very difficult to get that kind of performance out of a traditional, large cap stock.
Research is always an important part of investing. To assist you in digging through the mountains of penny stock trades, you should also subscribe to an alert or an email list. The experts who maintain these penny stock newsletters can pass on valuable tips to you.
In addition to this assistance, you should seek software designed to enhance the effectiveness of your investments. Price-performance software will help you determine when to invest and when to sell. Armed with these tools, you should be able to make very profitable penny stock trades.
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