Everything About Penny Stocks in India
A term “Penny Stocks” is often used in Indian Stock Market. Most of the people are confused or not aware of it at all. Selecting good stocks to invest in stock market is really important. While investing, most of the people picks up the Mid-Caps and Large-Caps stock but Penny Stocks can also work well in investing if you choose it wisely.
What are Penny Stocks?
Stocks whose prices are below ₹10 is generally considered as Penny Stocks in India. These are the stocks with Low Market capitalisation.
Penny stocks trades at very low price and volume. Liquidity in penny stocks is lesser as trading frequency is low in penny stocks. Sudden increase or decrease in price of penny stocks are very common as price volatility is more in these stocks. This is the reason that price prediction or movement of penny stocks using technical indicators does not work most of the time.
Key Points About Penny Stocks:
• Penny Stocks are good for Investing
As price movement using technical indicators is not always possible in penny stocks because of low liquidity. Thus, it indicates that penny stocks are not good for trading but it may be a good option if you are looking to invest for Mid Term and Long-term. Especially, if you want to start investing with lesser amount and you are a beginner in Investing.
• Higher Returns
If you are investing in stock market, then the risk is same either if you invest in Small Capitalisation stocks or in Large Capitalisation stocks. Good thing about penny stocks is that you can invest with lower amount as well. Go through the company’s fundaments and research well about the company’s financials and potentials. This will help you to identify good penny stocks and these stocks may give you higher returns if you invest in them for long term.
• Low Liquidity
Sometimes, due to low liquids in penny stocks, investors may face issues while buying or selling their stocks. Low liquidity also increases the chances of stocks price manipulation.
• Don’t Over-Invest in Penny Stocks
Do not invest your entire amount in Penny stocks only as low prices of penny stocks attracts the investors. While investing, choose only 2-3 good penny stocks to invest in. Do not over invest in penny stocks. Instead, include all type of stocks in your investment portfolio. It will help you lower your risk.
Penny stocks are good investing option especially if you want to invest with less amount or if you are a beginner in Stock Market Investing. But before investing, read and research about the company’s fundamental and choose penny stocks accordingly.