If you are looking to make some extra cash, you may be considering making an investment. Investments are some of the best ways to make money because they yield high returns. Usually, the only problem is trying to figure out which investments are the right choices. But, that is a lot easier when you come across penny stocks. Yes, penny stocks are small stocks that don’t seem like they would give you anything in return. Still, you should never judge a book by it’s cover because you don’t know what is inside until you take a look.
If you take a look inside penny stocks you will find that there is a lot more than meets the eye. How do you think Jordan Belfort made his fortune?
Pump And Dump
The name is a little bit disconcerting. But, it is perfectly legal as long as you don’t have any insider knowledge with regards to the stocks. The strategy works like this. Firstly, you hype up the product or service that you have an investment in through a particular medium. Then, you wait for the investment to rise. Finally, you cash in as soon as it hits a number that you feel won’t get any higher. Because you don’t need any insider knowledge with penny stocks, this tactic is legal. Still, it is not for the faint of heart, so make sure you know how you feel before you invest.
Spot A Niche
Not too many investors pay too much attention to penny stocks because they are so small. In fact, the name comes from the fact that they are under $2 in value. However, every dog has its day, and these stocks are no different. At times, there will come a point when their value will rise because they will suddenly come into fashion. For example, the company may have an unexpected rise in profits and they may look more profitable. Whatever the reason, you can take advantage of this niche if you spot it early. All you have to do then is offload your stocks when everyone else catches on to the trick. One tip: don’t milk it for all it’s worth. As soon as the others start to notice the trend, it is almost impossible to maintain your advantage. The key is to get out while the going is good.
Ride The Wave
In basic terms, this means that you can throw your stocks in with bigger stocks and make a tidy profit. How does this work? It works because penny stocks are usually held in other portfolios with bigger stocks. The benefit is that when these bigger portfolios start to increase in value, the other stocks also increase. Again, if you can see a ‘wave’ coming and you have stocks, get ready to sell.
There are stocks that are worth a lot more and are easier to sell. But, these stocks are not as risk adverse as the smaller ones. Seriously, what is the danger if you are only investing $2?