Knowing which asset to invest in is always tricky, as there are many factors to consider, such as the business and economic cycles that the economy is in, and the applicable monetary/fiscal policies of the country in which the asset is based. You should also take into account your trading style and objectives, as well as your risk tolerance and your investment horizon.
While most major indices are currently reaching new records and all-time highs, investors are wondering what to invest in to diversify their portfolio and profit from higher potential returns. That’s why penny stocks are quite popular types of stocks among retail traders, especially those who have a high tolerance for risk and limited trading capital.
Penny stocks are indeed very cheap companies (less than $5 a share) that you can either trade on a major exchange or over the counter. Usually, penny stocks represent small companies that can be found in any type of sector, even though trending industries like marijuana and biotech are quite popular sectors among penny stocks.
If you’re interested in trading or investing in penny stocks, you first need to understand the risks associated with these types of assets. First, penny stocks are not regulated like large-cap stocks, and do not have to conform to standards and information sharing procedures if they’re not regulated. That’s why it might be hard to find reliable information about penny stocks, as there can be a lack of transparency. This aspect, associated with the fact that these stocks aren’t very liquid, means that penny stocks are quite volatile, which can be risky.
That being said, this volatility can also be used to make larger profits — and there are many ways to minimize risk and protect your investments, especially these days with the increasingly sophisticated tools being developed by trading platforms. It’s perhaps for this reason that penny stocks are becoming increasingly popular, and you might want to consider them if they fit your trader’s profile, as they are great ways to make money with limited invested capital.
Finding the right penny stocks to trade depends on the trading style and strategy you’ve developed for penny stocks. Still, there are some promising penny stocks you might want to add to your watch list. Among the hottest penny stocks to buy right now, you can find companies in all types of industries, such as Ideanomics Inc. (NASDAQ: IDEX) in the software sector, U.S. Well Services Inc. (NASDAQ: USWS) in the oil & gas sector, Applied Genetic Technologies Corporation (NASDAQ: AGTC) in the biotech sector, and Uxin Limited (NASDAQ: UXIN) in the interactive Media sector, among others.
To get ahead as a penny stock trader, remember to get the right trading education, so then you can properly analyze companies and decide if they’re a good fit for your trading. You should also always do your research about a specific company to determine if it’s worth investing in. Have a look at some financial figures and ratios like earnings, sales, growth prospects, partnerships, etc.
