Whether it’s in the local or the US stock market, you might be asking this very question—is it worth it to invest in penny stocks? Is it? How would you know if you are investing in the right penny stocks? How do you discover penny stocks in the first place?
There are investors who love to play with penny stocks and to tell you honestly, it’s very risky to put your money in these types of stocks no matter how tempting. Still, companies with good fundamentals are still better than worthless stocks that are often victims of pump and dump schemes.
Before you invest in penny stocks, do you know what they are? I know for that you have been searching. Penny stocks are those that are worth less than one peso. Some stocks are also considered pennies even if they are more than one peso but less than 2 to 3 pesos. In US stocks, penny stocks are those that are usually less than $1-$3 per share. If you have been investing in the US stock market, you might have heard about NAKD, OCGN, GEVO, and similar stocks, they are considered pennies because of their small value per share.
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No, not all penny stocks are worthless. Just like in the US stock market, GEVO and OCGN have good fundamentals and future plans. Recently, the CEO of GEVO has been appointed by the newly elected President Biden in his Science team. This was a catalyst that made the stocks of GEVO increase this year. With its future plans, it’s only a matter of time before GEVO can no longer be considered as a penny stock. But, are all penny stocks worthy? The answer is no. If there are worthy stocks, there are also worthless penny stocks.
Worthless penny stocks are victims of pump and dump schemes. What do I mean by this? This means that they can soar up to 50% in one day and drop by more than 50% in one day as well. Investors hype the stocks so that those who fear missing out will join the hype. If you lose a good entry, you will end up buying the high price, seconds before big investors dump the stocks. So, is this safe? I would say no. If you don’t want to lose your money, never invest in penny stocks that are frequently pumped and dumped.
Yes, you may and it’s going to be worth it to invest in penny stocks with strong fundamentals. Like GEVO, you have to find worthy penny stocks. You must sort out the worthless ones so you can protect your money. This may take time especially if you are not yet an expert in screening penny stocks. If you want to invest your money in stocks with low risks, then don’t try penny stocks yet. Just get back to it when you are already good at judging good and bad stocks.
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