One of the reasons why people invest is to make a profit no one wants to invest
and lose their money therefore many people are seeking
investments with high returns as a means to build sustainable wealth
investing in penny stocks has become popular amongst investors especially
beginners for this reason however many people lose their
investments in penny stocks because they don't understand how they work
in this video you're about to learn how to invest in penny stocks for beginners
and smarter ways to profit from them and if you're new to the channel then hit
the subscribe button below for more life-changing content in recent years
investing has become more popular as people are getting to know the benefits
investors are always on the lookout for profitable investments with massive
returns therefore penny stocks have become popular amongst
investors because of the potential to make a great return
from them so what are penny stocks and why are investors interested in them
firstly let's explain what it means to invest in stocks before talking about
what penny stocks are investing in a company stock simply
means that you own a small percentage of the company
also the worth of a company known as the market capitalization
is calculated by multiplying the share price by the number of outstanding
shares for instance as at the time of making
this video the market capitalization of apple is over two trillion dollars with
about 16 billion outstanding shares and an average share
price of 120 per share using this information stocks
are further categorized into different types depending on their market value
therefore penny stocks or micro cap stocks are those with a smaller market
capitalization of less than 300 million dollars
although there are several definitions of penny stocks the generally accepted
one is that of the u.s securities and
exchange commission according to them penny stocks are
common shares of small public companies that trade for less than five dollars
per share furthermore penny stocks are usually
traded over the counter however few penny stocks trade on large
exchanges such as the new york stock exchange
and nasdaq in the past only stocks that traded below one dollar were considered
penny stocks and they are traded on the pink sheets most
penny stock companies are usually new and are either at the developmental
stage or offer just a few products now that you
have an idea of what penny stocks are let's talk about some of the pros and
cons of investing in them firstly i'll start with some of
the benefits of penny stocks and why you should invest in them
perhaps the major reason why people invest in penny stocks is that they have
the potential to yield a high return on investment
for instance a company like apple traded for 22 during its ipo closing
with a market capitalization of 1.7 billion dollars
today the same company is worth over two trillion dollars
which is over a thousand times of an increase in value since penny stocks are
still small some investors prefer them with the hope
that they'll become big someday a good example of a penny stock that
became successful is monster beverages in 2003 the average stock price was
below 10 cents a share and the market capitalization was less
than a million dollars however the market capitalization is
over 44 billion dollars today and the average share price is currently
about 84 apart from the potential yield a high
return on investment penny stocks are also known to generate
explosive growth within a short period of time
for instance the monster beverage stock grew by about 300 percent
between 2003 and 2004. although the return on investment of established
companies is usually consistent they may take a longer time to come to
fruition while this explosive stock growth is an
advantage of penny stocks it is also one of the reasons why it is less desirable
and i'll talk more about that later in this video so make sure you keep
watching until the end moreover there is a low barrier to entry
in penny stocks and investors could own multiple shares of a company with a
little upfront capital for example 120 can only buy you one share of apple
right now but with the same amount you could own 1200 units of a share worth 10
cents in this case an increase of just 5 cents
equivalent to a 50 profit that means that a small change
in price could potentially yield you a lot of money
another reason why people invest in penny stocks is the excitement that
comes with investing in a company that may become successful
for instance one of the founders of apple sold his 10 stake for just
800 because he wasn't sure that the company would become successful
that amount would be worth billions of dollars today however before you get
excited and invest your money in penny stocks
let's talk about some of the disadvantages firstly
investing in penny stocks is highly speculative and risky
since most penny stock companies are new they usually don't have any
widely accepted products and services with time most of them eventually go out
of business and investors lose their money
furthermore penny stocks are highly volatile and you could lose a lot of
money within a short period of time just like i said earlier penny stocks
can generate explosive growth but this also means that they can lose
their value rapidly for instance if a penny stock worth a
dollar a share drops to 50 cents a share that is a 50 loss and half of your
investment is gone the worst part is that something as
simple as a social media post could be responsible for driving down the prices
of these penny stocks another disadvantage of penny stocks is
the lack of information available to the public
because of this some investors may find it hard to make informed decisions for
example penny stocks listed on pink sheets are
not required to submit documents to the scc
therefore investors may not have any idea their financial status such as
whether they are generating revenue or not
and if by chance there is information available there's no assuring that the
information can be trusted sadly some of these companies use this
to their advantage by paying people to promote their shares to the
unsuspecting public once enough people fall for their trap they sell off their
shares at a profit and leave other investors at a loss perhaps the
major reason why these fraudulent schemes such as a pump and dump are
common with penny stocks is due to low liquidity investors may
find it hard to see buyers who are willing to purchase their shares
and when they eventually do they might be forced to sell them at a lower price
fraudulent traders take advantage of this by buying a large number of shares
to pump up the price when other investors start coming in
these traders sell off and leave the newcomers at a loss
unlike stocks and regulated exchanges penny stocks do not have a minimum
standard therefore a company might be performing poorly and
still available for sale over the counter
which makes investing in such a company highly risky
so with all these factors considered is it still possible to invest in penny
stocks and make a profit the answer is yes however you must
follow the secret of most successful investors which is
only investing in things you understand in the remaining part of this video you
will learn how to choose a stock screener
and how to research profitable penny stocks and even how to buy your first
penny stock although i said earlier that penny
stocks are highly speculative that doesn't mean that there are no
profitable penny stocks most of the big companies we have today started small
and some people even doubted their success however
those who understand how to predict the profitability of stocks were able to
invest in some of these companies early on
one of the easiest ways to narrow down your search for a profitable stock
quickly is to use what is known as stock
screeners these are tools that allow investors to quickly sort through
thousands of individual securities and focus on a few that they would like to
research based on certain criteria for example you can search for
investments with certain market capitalizations using a screener
most stock brokers have free screeners on their platform
while others are available through subscription sites
using a penny stock screener can save you a lot of time and help you find the
right stocks to invest in one of the easiest ways to screen a
penny stock is by using the price of a penny stock or market capitalization
another method to screen a penny stock is through the market you can easily
filter out stocks based on the exchange that they are traded on
in addition to these two you can filter your search based on the industry
for instance you can decide to limit your search to industries that are
booming and have potential for lots of growth
some screeners even give you access to screen stocks based on their highest
or lowest trading price within a year you could also filter stocks based on
their trading volume volatility and even some fundamentals
such as the price to earnings ratio now let's talk about how to research for
potentially profitable penny stocks using a penny stock screener is not
enough to make a decision it will only help you narrow down your search so you
can carry out further research firstly you don't want to invest in a
penny stock without reliable information such as the volume of trades
their products and services they offer and the amount of revenue the company
generates a company may have the potential to
become profitable if it has products and services that could easily compete with
existing ones you want to invest in a company that
offers products and services that people want to buy
and not a company that could soon go out of business therefore look at a
company's profile and study its history and the reputation of its managers
if the company has strong earnings records and the performance has been
stable you can use that to predict its future
profitability again study the trends to know which
industries are performing well at the moment and those that will likely be
struggling once you've concluded your research and
found promising stocks the next step is to invest in them
just like regular stocks you need a broker to buy penny stocks there are
some penny stocks listed on major exchanges like the new york stock
exchange and the nasdaq the advantage of buying such penny
stocks is that these major exchanges require them to submit their financial
statements this means that you would have access to
necessary information considering the performance of such companies
others that are not listed on major exchanges are available over the counter
an example is the nasdaq-owned over-the-counter bulletin board
or otcbb which requires penny stock companies listed to provide
shareholders with up-to-date financial records you can also buy penny stocks on
over-the-counter market group but these are considered risky because of
their low standards therefore it's easier for almost any
company to be publicly traded on such a platform
and if you want to learn how to trade penny stocks start with paper trading
that is trading with a demo account that does not involve real money
however it is important to know every investment involves risk
especially with penny stocks therefore only invest the amount of money that you
can afford to lose now you've seen some of the benefits and
disadvantages of penny stocks as well as how to invest in them in this video
i trust that these will serve you well in your decision about whether or not to
start investing in penny stocks thanks for watching if you want to go
from the life you have to the life you deserve
then hit the subscribe button now