Penny stocks are extremely unstable microcap stock that generally trades at under $5 per share. When it comes to investing your hard earned money, majority of people invest in companies that are well-established in the market and have high rating. Investing in such companies is considered to be a safe and judicious decision. But such investments give profitable returns only after waiting for at least 1-2 years.

Unlike the big players there are smaller companies with lower market capitalization. They are either new or not well established. Thus to attract the investors they trade their stock at a relatively lower value. These companies are undiscovered, undervalued and they may increase the stock price very soon.

Penny stock work under the axiom of no risk no gain. The risk associated with penny stock investing is though high but you can get a gain of up to 10 times of your investment in just a matter of few hours. There are various websites which publish a list of hottest penny stock deals available in the market.

Let us go through some important points investors should always take into consideration before investing in penny stocks -

• The company should not be volatile. Before investing you should ensure that the company has intentions to stay in business.
• A company’s owners may even at times issue penny stocks as an attempt to offload their ownership to investors as they do not think the company has a bright future.
• Before investing in penny stocks a proper research should be done. The stock portfolio should be watched carefully. Since large percentage shifts happen in few minutes, one has to learn how and when to buy and sell their penny stocks.
• Refrain from making a huge investment in penny stocks as it may so happen that you are the only share holder and only one to bear the loss if anything goes wrong.
• One can even contact a broker for help in dealing in hot penny stocks.
• A good penny stock may yield good returns over the years. It is not easy to get full disclosure.
  
  

Although risky but investing in penny stock is a lucrative option for those looking at multiplying their money manifolds in a short span of time. Unlike other stocks one does not have to wait for a long duration to reap profits. A little bit of experience, understanding of the market and proper research can make it an amusing activity that you will not only enjoy but also be paid for.

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