Rules on Picking Penny Stocks – Paradigm Capital Management

Penny stocks are high risk, high reward stock plays. When buying these high risk stocks you must pick the right stock to buy at the right price. If you pick the wrong stock or you time your purchase poorly you will lose some money, maybe all of your investment. On the other hand with the right stock and the right timing you could make a huge profit on a small investment. This is stock trading and all stock trading is unpredictable, this becomes even more apparent in penny stocks. Even with research you will pick wrong some times, limiting the losses and riding the profits will enable you to be successful and limit your overall risk.

 

  • Its safer to play the listed penny stocks or the over the counter bulletin board (OTCBB) stocks than the pink sheets. Especially when your just learning. The OTCBB stocks must file with the SEC so there is more information available on the company such as the share structure and financial background. You can also find plenty of low priced stocks trading on the major exchanges such as the nasdaq.
  • Look at a companies history, watch out for reverse splits, look for a long record of trading without manipulating stock price or operating shares. These companies will be safer. There is a lot of fraud in the penny stock market and looking at a companies history will help you weed out some of the bad ones. At first avoid “penny stock picks” especially of new companies, just watch the price you could buy at and outcome. They are not usually a good investment, but may be good for quicker trades once you know what you’re doing.
  • Find out what makes the company valuable, do they have a lot of land, oil, gas or diamond mines. Are they ripe to be acquired by another company, are they making their own acquisitions. Do they have patents on their products or patents pending. What is their reputation in the field. If you live in their area or know someone in that area, go visit the facilities.
  • What are the negatives of a company, what do they owe, what are they’re debts and liabilities? If a company you like has too much debt, when that debt is called they may need to sell shares (dump) into the market to raise the capital. Ideally you want a company with no debt for the time frame you wish to own it.
  • Penny stocks in the areas that are running on the major exchanges are usually a good bet, if oil is strong look for oil penny stocks. Same for gold et al. Emerging markets and fast growing industries are also ideal for investment. Stay on top of the market in general take that knowledge to these low priced stocks. Research what will be hot over next few years and then dig through these low priced companies.
  • Decide how much money you will spend/invest on penny stocks. Just a little bit of money, a small percentage of your portfolio and then don’t go over your budgeted allotment. Always be safe with your money, don’t fall in love with a stock, don’t risk money you don’t want to lose. Often traders will allocate 5-10% of their portfolio to the riskier stocks.

 

For more information on penny stock investments you can consult with Paradigm Capital Management a Small Cap Company.

 

Paradigm Capital Management has the experts when it comes to Small Cap Investment and they can definitely assist you in achieving your financial goal, contact us at (518) 431-3500

 

Read also: Which is more reliable – Analytical or Behavioral Stock Pick Analysis

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Why Mid Cap Funds Are For You?

The market cap of a fund helps an investor know the size of the company he could potentially invest in. These cap sizes tend to vary over time. They also vary depending on brokerage houses. Generally, a small cap fund falls into the range of less than one billion dollars, a mid cap fund falls between one billion and eight billion dollars and the large cap funds are all above eight billion dollars. Large fund tend to have ownership level restrictions, and are best for long-term investors who aren’t looking for much risk. Small cap funds though, invest in companies that may not be all that stable – as they are still likely in the early stages of their business and could possible collapse. This is why small one are highly volatile to invest in, though they can give large returns. You need to be on your toes and know what you’re doing to get the best here.

 

A mid cap fund falls somewhere in-between these two funds. The companies in this range are slightly more stable than small cap funds. It doesn’t always end up moving with the market and its ups and downs – so there happens to be more stability here. This means that you need to fear a little less about their volatility.

 

It gives you more returns than other as well – and it’s not quite so long-term. So you get better returns than the large caps and better stability than with the small caps when you pick a mid cap fund. Over a period of time a small and mid one is likely to outperform a large cap fund. This is because a small and mid cap fund are more likely to focus on their growth strategy than already large conglomerates. They are more dynamic in their business as they are more compact.

 

But don’t depend on every single fund which is doing well – there are always exceptions to the rule. Look at your own finances and understand where you can afford to use your money. If you are more interested in long run investments, perhaps it isn’t for you. But if you want a higher return with less volatility you could consider investing in it. Remember to do your homework though, before you actually invest in mutual funds. You need to know where your money is going and what are the risks involved in a particular investment when you choose to invest. This fund value invested in midsized companies which would give you higher returns. Generally people invest in this fund because it offers vast growth opportunities as compared to other sectors.

 

Small companies often offered more growth as compared to big companies. So, we should invest in fund which can invest in small, large and mid size companies

 

So, before investing in it research the market, analyze it which helps you to get what you think about the return amount.

 

If you want to learn more, then consult with the experts at Paradigm Capital Management, Inc. Paradigm Management is a trusted leader in small cap and mid cap investing, and invests in value stocks of companies across all capitalization

Contact at (518) 431-3500 or visit http://www.paradigmcapital.com/