Penny Stocks

penny stocks is any stock that trades under $5.00 per share. ASX investors looking to buy ASX penny stocks require very cheap stocks that subsequently run up and become highly lucrative holdings. ASX penny stocks are the tiny ASX listed small caps that you can buy for a very small amount. They used to cost ‘a penny,’ but now of course, it’s cents.

Investors need quality stock research when investing in penny stocks

Penny stocks are renowned for their high-risk profile. You often read about penny stocks that offer huge, unbelievable returns or that people crash out and lose money. So, is this true? It is if you don’t do your research and if you really are only buying penny stocks that have a very low market cap and are only a few cents.

ASX penny stocks are a vital aspect of an Australian investor’s diversified investment portfolio because of their high return potential: Investors trade over the counter (OTC). Penny stocks are geared for growth, so they’re more speculative than larger businesses. But finding a winning or high-quality penny stock can offer significant rewards to risk-tolerant and patient investors.

Moreover, when researching, it pays off to know the difference between the ASX 200 and the All-Ords to further boost your stock investments. A good stock investment balance consists of penny stocks and bigger stocks from reputable companies, such as those belonging to ASX200.

What is the difference between penny stocks and small cap stocks?

small cap stocks. There are a lot of ASX micro-cap or small cap stocks that are ‘penny stocks’ because they literally cost a few cents and are certainly well under $5 a share. The definition of penny stocks is only about how much each share costs, but it is not considering the size or value of the entire company. And this is where risk really comes into it.

Are all penny stocks a risky investment?

Penny stocks have a bad reputation as being highly risky stocks to buy. They’re volatile and susceptible to stock price manipulation. Hence, it’s important for traders to be diligent in finding and analysing winning penny stocks. You always hear about people who bought in and lost all their money, but you also always hear about the people who made a lot of money from buying penny stocks!

Why is industry life-cycle analysis important?

Aside from studying a company’s balance sheet, penny stock traders, especially new traders, should also perform an industry life-cycle analysis. The initial phase or ‘pioneering phase’ includes many small-sized competitors trading at very low prices due to their speculative nature. As these companies pass through the initial stage, they gain higher market attention on the ‘growth phase,’ increasing their demand and sales. Many tech startups began as penny stocks that eventually gained enormous valuations and market cap gains.

ASX stock investors don’t want to put their money, whether it’s a few cents or a few hundred dollars or, in fact, any money into the dust bin. Money is hard to earn, and they are aware of that.