Penny shares 5 stuffs you must know before investing

Author: Kailash Soni
by Kailash Soni
Posted: Apr 21, 2017

Penny shares are those which trade at low cost and have a low market capitalization. While there is no basic definition, penny shares in India for the most part exchange at Rs 0.05 to Rs 10 for each share. People invest into these penny shares and lose money as their share cost is very fluctuating. What ought to a investor know before investing into Penny shares in India?

5 stuffs you should know before investing into penny shares in India

1. Do not look at the share cost, yet look at the worth: Penny shares are available at a generally low share cost. Share cost will entice investors to purchase in such shares. For instance, Infosys stock cost is Rs 2,180 for each share. Then again, one of the penny shares like GV Films is Rs 0.58 for every share. Presently if you have Rs 10,000 to invest, you will get just 4 Infosys stocks, while then again you will get 17,240 stocks of GV Films. Here one ought not to think what number of stocks they are getting, but rather what value these shares offer. I am not saying this penny share is great or poor; however a investor ought to evaluate how great such a stock is before investing into such shares.

2. Low volumes mean low liquidity: Several Penny shares by and large trade at low volume. Implies if you need to sell and turn out, there won't not be any purchasers. Thus invest into penny shares that have high volume with the goal that you can liquidate if required. E.g. Odyssey Corp share cost is Rs 4.23 and avg trading volume is 24,200 stocks as it were. The maximum amount traded is just Rs 1 Lakh. Such shares have less liquidity as it will rely on upon demand from purchasers.

3. Upper circuit and lower circuits: Penny shares have upper circuit and lower circuit. Upper circuit implies a stock cost can't increment past a pre-decided rate move. For the most part it would be 5 Percent to 10 Percent. Lower down circuit then again implies a stock cost can't decrease by indicated rate. As a investor, you ought to realize that you can't double your cash in a limited capacity to focus, on the grounds that a stock has secured upper circuit for couple of days. Penny shares may see upper circuit for a couple days and can see the lower circuit by few days in based on demand from purchasers.

4. Brokers/Promoters can influence share costs: Since penny shares have low volume, share costs for such shares can be effectively manipulated by market participants, share brokers or promoters of the organization. if a penny share cost is achieving upper circuit each day with no news about the organization, it plainly demonstrates that somebody is manipulating the share cost. As a investor if you hear a optimistic news about the organization and believe the future prospects are great, you can invest into an organization regardless whether it is striking upper circuit or not.

5. Ignore winner stories: Many share brokers, sites, blogs, and so on show an a success story about penny stocks. While these look great, nobody needs to discuss shrouded stories about investors losing money on penny shares. Many share brokers charge high expenses, giving penny stock suggestions showing winner story saying a penny share up by 100 Percent or 500 Percent. Investors drop for that trap, invest and fall money. As a share investor, you ought to comprehend why a penny stock cost has gone up, the purposes for that and future prospects. If you are persuaded by this, you can accept comparative systems for other penny shares and invest based on such strategies.

Concluding comments: Investing in penny shares is a highly danger. If you are a high risk investor, consider these 5 vital things before investing into such penny shares.

About the Author

Swastika Investmart Stock Broking Company India it is aspires to make derivatives trading a simple and gainful risk for its investors.

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Author: Kailash Soni

Kailash Soni

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Member since: Jan 21, 2016
Total live articles: 51

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