In article will learn about what is penny stock and how to deal with the penny stock in the share market.
if the company is very small or companies market capitalization is too small then this company stock called as a penny stock. generally, penny stock share price is too less because the company’s market capitalization is too small that’s why penny share prices are too less.
when a new company started that time company is very small and called as a penny stock because companies market capitalization is too small or big company share price falling down and that time the big company called as a penny share because of the bad performance of the companies result.
For example, the big company share price right now $100 then the share price started falling because of companies’ bad performance, and if bad performance continues companies that performance make big companies large-cap stock to penny shares. And this happened many times in the past.
in simple words, penny stock means are companies which companies market capitalization is very small that’s why this is called a penny share, also penny share price is very low.
The good thing about penny stock.
penny stocks can give you an unlimited percentage of return that you can’t expect from the large caps stock. the large caps stock more reliable then penny share but penny share can give you an unlimited percent of return, for example, you have brought penny stocks at the price of $1 if the share price rising 30 dollars than that means the stock is multi-bagger. and the large-cap stock doesn’t give you that much return that’s why some trader investors like small companies share and buy a penny stock.
small companies have lots of chances to grow and small companies can be a large-cap stock in the future.
the bad thing about a penny share
here are some points that penny share is bad for some trader and give you two massive amounts of negative return that’s why some people are or some investors try to avoid penny share. Read below the topics
- penny stocks are too Risky. Because most of the penny stock is not able to be a large-cap stock or large company that’s why your investment can spoil.many of the small companies that can shut down their business. As a small company doesn’t have that much money to survive or compete with big companies that’s why most of the small companies failed to capture the market until the company is doing something unique to compete with big companies.
- sometimes large companies share prices falling down And become a penny share at that time the investing in the share is not safe because the company share price down because the company is not working well. so when most of the investors selling the company’s stock because of the bad performance of the stock. If you are buying the stock that means you are putting your money at risk and most of the time this company stock falling down more and more and not rising again that’s why penny share is not good at all.
should I invest in Penny stock?
if the companies financial status is very good and the future of the companies good. or in another word, the future of the sector is good at that time you can invest in these companies share if the share price valuation is not higher than the actual share price. this share can give you multiple percentages of Return In the future if the company running well.
and before investing in share small company you have to check the company’s management name and track record because management will run the company if management is not good then your investment is not safe that’s why you have to check this point before investing in a penny stock.
one small tip from me you can invest good company penny stock a very small amount of money because of a large amount of money good for this.
conclusion
penny stock means accompany share price his very low because all company market capitalization also lo it can be a very small company that’s why the company’s share price is low.
investing in the penny stocks good if the penny stock financial and fundamental is good and the management of the company also well known and trustable, then penny stock this gives you an unlimited percentage of Return In the future but if the companies financial and fundamental is not good then your investment can be in risk.