Investing in penny shares is a risk. You can lose everything, but you can also make a lot of money if you invest wisely and diversify your portfolio. In this guide we will explore the world of penny shares and how to buy penny shares in the UK.
What is Penny Share?
Penny shares are low-priced and low priced stocks, typically traded over the counter as opposed to on a major exchange.
Investing in penny shares uk is considered riskier than investing in blue chip or other well known, established companies. Penny share prices do not necessarily reflect their investment value because many penny stock investors buy penny securities for non-value reasons such as pure speculation (anticipating that they will rise rapidly) rather than fundamental business evaluation (identifying whether there is any real company behind the security and what its earning power might be). It’s very easy to lose money if you don’t know anything about penny stocks but this guide should give anybody an edge when looking to invest into penny shares.
How can You recognize penny Shares?
There are penny shares and penny stocks. There is a difference between penny share price and penny stock price. The main characteristic for identifying penny shares or penny stocks is the low market cap (the total value of all issued equity) – this ranges between GBP 50 million to GBP 300 million dollars depending on the industry, company size, company financials etc… A common rule of thumb among traders who do not want to over-trade but still aim at making profits with their trades involves investing in companies that have less than GBP 500 Million capitalization. If you look under the ‘Market Cap’ column on Yahoo Finance page for example , you’ll notice if it says anything lower than GBP 500 million then it’s most likely considered as a penny share.
How Can You Buy Penny shares?
To buy penny shares you need to open an account with a broker. The best brokers for penny stock trading are OTC Markets or pink sheets as they allow penny stocks and penny shares (provided that the company has provided financial statements). The downside of opening such accounts is that not all countries have access to those types of brokerage, therefore it’s important to be aware which ones do before committing yourself to try this type of investment strategy. Some people also use companies like buyshares.co.uk but these tend not to offer penny securities because there isn’t enough demand from their clients at this point in time so we would recommend going through our list of penny stock brokers first. There is no “best” site to buy penny shares online – it’s all about choice and preference.
What are the Risks for Penny Shares?
Penny stocks can be very volatile, so there is a risk of quick losses if you don’t time your trades well. If you’re not careful when choosing a penny share broker then high fees will eat into any potential profits. There could also be additional costs associated with finding or promoting penny stock investment opportunities that may result in even more lost money if they do not pan out as expected . Penny stocks give smaller companies access to capital without having to go through an IPO but this creates less transparency which means lower quality securities trading at higher prices than traditional blue chip equities because many investors place too much trust in these types of penny shares. Finally penny shares are not very liquid – it is difficult to buy and sell penny shares quickly.
What Kind of Penny Share Should You Look for?
You want a company that has “pennies” because they will be less mature than other companies, thus more risky but also the most profitable when the time comes around. The penny market allows people to take advantage of these higher risk investments and make money from them within weeks or months without knowing too much about trading stocks in general which makes penny stock trading an easier strategy compared with traditional blue chip investing strategies . Look out for established business models where new products have been launched on the market recently so you can predict future growth rates based on past performance if there are any earnings reports available. It’s also good to look for penny shares where a large portion of the company’s equity is owned by management and it has been increasing over time . Furthermore penny share prices should be low enough that there is still room for increase but high enough to make an impact on your profit goals.