Shares of small public companies that start at very low prices but can grow subsequently are referred to as penny stocks. These are also referred to by other names such as small-cap stocks, micro-cap, etc. Investing in these stocks can be the best thing, but only if you know the best ones to invest in. There are also risks associated with these penny stocks. You must do your homework before investing in penny stocks. These are easy to buy and sell as they are readily available on Robinhood.
Advantages and Disadvantages
Risks and Limitations
- These stocks are cheap to buy and sell, true, but are very volatile. They can turn from a hundred percent good investment to a hundred percent bad investment in seconds. Investors need to be very active and keep an eye on the prices to pull out the money as soon the scenario degrades.
- Penny stocks have a history of adding to white-collar activities.
- Investors might always be ready to accept that they can quickly lose their entire investment. While they will not go into debt, they might lose the entire investment if the stocks crash.
- Trading is infrequent with them, so investors might not be able to sell them whenever they want.
- Fraud risks are high in these stocks. One needs to study the stocks and the company behind them properly.
Points to Ponder before Investing
- Look at the stock trend, and if the trend is consistent downward, you might reconsider before investing. However, if there has been a break, you need to study the company’s history and see if the owners have a chance to make it big. Do they have the skills to bring in the success required?
- What is the industry that it belongs to? Is it a booming industry or a settled one? If it is new, does it have any chances to flourish? How is it useful?
- Look at the quarterly profits of the company. If the company’s profits for two consecutive quarters are not very promising, reconsider buying its stock.
- Check the news for updates on the company.
- Do not make a haste decision of investing in just any company.
There are a lot of penny stocks that you can get under $1, but here are some names that will give you a mix of growth and value. Document Security System (DSS) is a US-based company, and the stock is available on Robinhood penny stock under $1. Sesen Bio is also a Massachusetts-based company that you can look for penny stocks to buy this week. Waitr Holdings, Gee Group, Surgalign are also some names you can consider when buying penny stocks under $1.
Penny stocks can be fun trading and make you a millionaire if you get lucky, but these are very risky stocks that will not make you go bankrupt until and unless you have emptied your bank accounts into buying them. But they also hold the possibility of completely gulping down all your invested money overnight.
