Buying Penny Shares
With all the advancements made in computer technology and Internet, now everyone can buy penny shares. We will also try to answer the important question exactly which are the best penny shares to buy? But let's just clarify what penny share is for those of you who are hearing it for the first time. A penny share is a share of stock that trades at near or under 5 dollars. So any stock from a company whose shares are worth less than 5 dollars is considered penny stock.
You might find it funny but the truth is that the best brokers are the ones who follow companies like a football fan follows his favorite team. They learn everything there is to know on the given subject. Follow all the latest news. releases. Know who the major shareholders are. And that's the way it should be done since You, as a shareholder, have every right to make sure your company is being run the right way - the one that leads to maximum earnings following a path of constant growth.
I would advice you to stray away from investing in shares traded on the Alternative Investment Market or London Stock Exchange. Yes, there are some good deals among PLUS-quoted shares, which have replaced the old Ofex market, but that's only if you are can accept the risk involved. At least all these markets have level of liquidity. Also, some penny shares lack earnings. Buying shares of young IT companies is in this category (low earnings), so it's best to analyze them using price/sales ratio. If you are thinking about investing in a hi-tech company, make sure it has good revenues. Look for earnings either now or in the foreseeable future. Also, go for companies with a strong business model. The problem with IT companies is that their asset is invisible - it's just programming code, that might be worth billions of dollars or it could be absolute garbage. That's the big risk with IT companies whose assets are in cyberspace.
When you buy penny shares, you must be aware that there is a risk of encountering a fraudlent company. This is known as penny stock fraud. To avoid problems like that, your best bet is to make a check first by for example consulting yourself with Stock Detective Web Site at www.stockdetective.com. Bottom line is that if you avoid the existing traps, you can make some really good money from penny shares. But the general rule is that no more than 15% of your shares should be in penny shares due to the high level of risk.
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