There truly is nothing more exciting than seeing your investment grow. And if it’s all in a short span of time even better. This type of investment is a penny share investment for beginners. But of course, with the good comes the bad like not all small-caps are worthy investments. Some could be amazing. Others you’d be completely crazy to buy and could end up losing big money.
Ever heard the saying “Don’t place all your eggs in one basket.”
The saying rings true in Penny stock trading as investing all or most of your money into a single share is where many investors start taking unnecessary risks. Just as your one basket with your eggs in it might break and you could lose all your eggs.
It’s just the same with a penny stock. While a big gain could help you make money much fast a loss will see the value of your investments crash to worthless overnight.
Rather weigh your losses by taking some of your eggs into another basket. You’d rather invest a sensible amount of money into these shares. Looking at how much money you’re prepared to lose without having sleepless nights. That’s how much you should be investing into each share. Not a cent more.
Also don’t hedge all your bets
By investing all of your cash into a single penny share, could mean you could’ve bought into an illiquid penny stock with all your money. And liquidity in penny shares is very real and can’t be ignored.
When it comes to selling your share you’ll struggle and have to take whatever price the market gives you, which will be lower than you could’ve got if you bought less shares. Not only can making this mistake eat into your profits, but it will also make all your losses bigger, Francois Joubert, the editor of Red Hot Penny Shares advices.
Therefore never buy more than 10% of a share’s daily value traded. That way you’ll always be able to buy and sell your shares for a fair price.
