The present economic era has undergone a severe crunch. With increasing cost of living, rising inflation, low paid jobs and lack of investment opportunities, people try to make the most out of their savings to hedge themselves from any unforeseen financial turmoil. There are many ways to reap some juice out of your savings such as depositing them in a bank account, prize bonds, piling up gold, however investing in stocks and shares seems to offer a greater return from your buck. Although one must bear the risks associated with it, if a thorough homework is carried out pre hand, than quiet handsome returns could be generated through stock dealings.
For investors who are seeking avenues to channelize their surplus funds, there exists one option in the form of penny stocks. Just like any other shares, they have similar characteristics. When companies are in need of capital they issue their shares to the public to fulfill the deficiency. However what differentiates a penny stock from any other conventional stock is its relatively low par face value which is mostly issued below $5 in most markets. Penny stocks are usually floated by small companies and have significantly less market capitalization then other stocks.
While it may have been a target for many critics owing to its inherent risky nature, since it’s not listed on a stock exchange and is not regulated by any regulatory body, still it holds tremendous potential to boost your earnings on account of multiple factors .
– Firstly the amount of initial capital outlay is very low which allows small investors to gamble with their money.
– Their low amount allows for larger trading volumes and hence the chance for maximizing returns increases.
– It provides you the opportunity to make plenty amount of money in the shortest amount of time
– The return is umpteenth times higher in case the share performs above expectation.
We know that as per market fundamentals, it is very risky to invest in companies that are new entrants and do not have sufficient accreditation, however majority of blue chip companies are already going through their maturity phase ,they may not be risky but returns cannot increase at an exponential rate due to saturated growth. But for small companies with high potential, there is more on the table to offer. This room for future growth at a relatively less expense makes penny stocks such a lucrative investment option.
Though it offers considerable benefits, however it comes along with its fair share of risk. Hence, immense caution must be exercised before you experiment with your hard earned money. You need to conduct a comprehensive research about the company, whose penny stocks you are willing to purchase and if it can be ascertained that the prospects are bright for its growth then you can invest in their stocks and multiply the returns. Identify and make a list of all small companies who uphold a promising future and then analyze their business activities, key performance indicators ,their management policies and commitment and whether the segment they are operating in is profitable or not.