Penny stocks definition
Penny stocks are those stocks whose market capitalization is usually less than 100 crores. Also, the price of one share of a penny stock company is usually from or below Rs 10. Due to very low share prices, the initial investor, or those who want to invest with less capital, are drawn towards penny stocks. Most penny stocks are quite risky.
Topics related to Penny Stock, that we will cover in this post
- Best penny stocks for 2021 in India.
- penny stock list.
- penny stocks India.
- penny stocks to buy today.
- what are penny stocks in India?
- Penny Stocks: Best Penny Stocks in India
- Top penny stocks.
- Benefits and Disadvantages of Penny Stocks.
- Can you make money in penny stocks?
In this section, we will teach you all the basics that you need to know before you know so that you can invest with confidence.
Penny Stock
Penny stocks trade for very low figures - sometimes a fraction value of a penny per share.
They are not required to meet all the same standards as the companies listed on NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).
Many experts consider penny stocks susceptible to price manipulation and advise avoiding them. Some operators buy a lot of shares at a low price. When the news of a lot of buying comes into the market, then the price of that share goes up a lot. The operators then book profits by selling all their shares. After that, the price falls again and the normal investor gets into the trap of penny stocks.
Check out our Stock average down calculator.
New investors often have a passion for buying penny stocks. The new investor has less capital and prefers to buy cheap or penny stocks instead of buying expensive (fundamentally strong) stocks from them. They are often traded on smaller exchanges. Penny stocks can be bought for nothing (a very small percentage) per share, sometimes not even a penny.
Investors often think it can't be less than this. It works even after this and comes many times. Many companies with penny stocks go bankrupt very soon because most of those companies are in debt.
Let us see why penny stocks are a bad idea to start investing.
First, they are not required to follow the same accounting standards as the companies listed in the NSE or BSE. Oftentimes, companies make money simply because they do not follow these standards or meet the minimum requirements of these exchanges. This is not the kind of company you should invest in.
These companies are not covered by analysts, which means that very little historical or current information is available.
In the end, these companies are incredibly volatile. This is what attracts novice investors to stocks - the potential for massive short-term growth. Keep in mind, that this works both ways and money stocks can quickly become worthless.
There is always a risk of price manipulation in penny stocks as they are available at very low prices. There is always the risk of pumping and dumping in penny stocks. A pump and dump involve an investor who buys a large amount of penny stock. Then they disseminate information (claimed inside information) about the company through newspapers, message boards, cold calling, SMS, etc.
Investors start buying (pumping) the stock, leading to price increases and pushing more and more investors to invest. The original investor then sells or 'dumps' his large amount of stock and price plummets.
Penny stocks may seem attractive to young investors, but in reality, they are a complete gamble. Investing in established companies with excellent track records is a safer and more attractive place for your money.
Penny stock list
| Stock Symbol | Share Price(INR) |
|---|---|
| 3IINFOTECH | 9.45 |
| GILDTECH | 8.4 |
| 3PLAND | 6.15 |
| ENERGYDEV | 6.4 |
| A2ZINFRA | 8.45 |
Advantages of penny stock
- The value of a penny share is very low so that you can buy more shares in less money and if the value of the stock increases in the future, then you get more profit.
- The initial investor can invest in shares with less money and can get a good profit by investing in Penny shares.
Before investing in Penny shares, you should also know their losses well.
Disadvantages of Penny Stock
- Just as you can get more profit in Penny shares, in the same way, it can also cause more losses in the fall of the stock.
- Many times penny stocks are also in the eyes of the operators and they can take advantage of this. They book their profits by taking any penny stock up and later the price of that share falls, which causes ordinary investors to fall.
Interesting topics about the stock market that every investor must know.
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Really good article.
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