Before You Lose Money Investing In Penny Stocks, Read These 4 Basic Facts

Losing all or most of your investment with penny stocks is definitely a possibility that you should accept if you plan to invest in penny stocks. That being said, there are certain ways you can mitigate your risk. Some investments are riskier than others. If the risk of penny stocks is too much for you, you can try investing with safer options such as certificates of deposits, bonds, real estate, or larger stocks. Since penny stocks are also cheaper per share, if you invest less, you may have less to lose. One reason why people are interested in penny stocks is because their initial start up capital is relatively small.

Learn How To Invest In Penny Stocks With Zero Risk

If you want to try investing in penny stocks with zero risk, you can invest with one of the fake money stock market simulator platforms. Fake money invested in simulator platforms allow you to simulate investing in real stocks, however your gains and losses are not real and the money is not real.  You will not actually lose or gain any money, but you will be able to see what your gains or losses would have been if you did invest real money. These types of platforms can be a good opportunity to learn more about investing. You have zero financial risk by participating in these fake money platforms, but you also have zero financial gain. You may be able to gain some knowledge, which is still valuable and can give you insight into future investments.

Things To Be Cautious About When Investing In Penny Stocks

Do not catch a falling knife. Some traders trade based on technical analysis. They think that if something has gone up a lot in the past day, then it will probably stop going up since it has already gone up so much. They may also do the reverse and see if a stock has fallen a lot in the past day, then it probably won’t fall that much more since it has already fallen so much. The type of in thinking may have some logic but it can also be wrong when it comes to investments. A stock can fall by 90% in one day, and then it can keep falling all the way till the price is zero and the company is bankrupt. Just because the price has fallen, that does not mean it is a good deal. Do not catch a falling knife.

Use Due Diligence Before You Invest In Penny Stocks

Do your due diligence. If you do not do any research about the company that you are investing in, and you just randomly buy a stock, then you are essentially gambling. You may be better off just going to Las Vegas and putting it all on red. When you are investing you should research the companies past performance as well as their current situation. Past performance does not guarantee future success, but it is one of many factors involved in due diligence.

Never Invest What You Cannot Afford To Lose

Never invest what you cannot afford to lose. Just because penny stocks may only cost pennies per share, the value of those shares good could go to zero pennies. There is never any guarantee that a stock will ever go up. If you want something that is guaranteed, then you should buy a certificate of deposit. Certificates of deposit are FDIC insured and guaranteed by the US government. You can make guaranteed money if you invest in certificates of deposit. The catch is at the return is actually not that high, and they only keep pace with inflation. That being said, it’s better to get some return than no return. Gauge your risk tolerance, and if you have money you want to allocate to a lower risk investment, then you can put it in a certificate of deposit. If you have other types of money that you want to put into high-risk investments, then you can buy some stocks.

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