We all as a human being have myths about something or the other. It is basically the assumption about something about which we actually don’t know and when we realize the reality, we come to know that the assumptions are all false.
The same is with penny stocks. General public have various myths about penny stocks, in fact they have a bad first impression and are ignored. The purpose of writing this article is to clear the myths about the penny stock trade and get into the reality mode.
Below are some myths that overshadow the penny stocks:
- Penny Stocks Investment will end up Losing Whole Investment: This stems from the belief that penny stocks are very risky trade. It is true that penny stocks are risky but investment in share market in any category stock involves risk. It also applies in any kind of business. Success is achieved when a businessman minimize the risk. Same applies with investing in penny stocks. Investor should act smartly to minimize the risk of trading in penny stock by choosing the stock with correct analysis.
- There is not enough Liquidity in Penny Stocks: Many people feel like that penny stocks have very low liquidity. Liquidity simply means enough volumes so as able to buy and sell shares easily. Low liquidity on any day means less traders trading on that stock. However huge amount of trades means more traders buying and selling the stock.
- It is easy to make money out of Penny Stocks Investment: The calculation looks easier but it is not that easy when it comes to practicality. Only 20 cents increase in $1 per share gives 20% profit but if it would have been this much easy, there would have been lots of millionaires. However it is rewarding for those who make proper analyses to find that gem of a stock.