There are many stock investment experts who believe that penny stocks are worth nothing. Investment in small cap stocks is dangerous and the investors need to avoid them for their high volatility. If you are ignoring penny stocks, it doesn’t mean that rest of the world also doesn’t appreciate them. The analysis of these stocks with identification of right companies is never a wrong deal. You may become a part of the future giant by trusting the newbie investors and purchasing their stocks at the lowest prices.
Buying shares of a company means that you trust the particular organization and get issued shares of the associated group. It is the best way to obtain funds from the public and mark the high-end business strategies to get high ROI for the stock holders and of course, the company. visit http://theramaxrelief.com/penny-stocks-find-out-the-reliable-companies-to-make-investment/ to read how to choose reliable penny stock companies. Despite of fluctuations, the stock prices of a prosperous company grows or remains consistent. It can also drop, but the percentage is on lower side. The price of stocks drops due to economic problems on global or local basis. Over the time, there are many prosperous companies having rise in price of their shares and it can earn higher fortunes for the stock holders. The financial analysts reveal that many stocks have outperformed all the investment instruments in the long term.
Analysis in selection of the Good Stocks
It is essential for the investors to check out the right company for making investment. There are many guidelines to follow in doing your homework to find out the most appropriate company to make investment. The process is termed as Fundamental Analysis. The stock selection criteria are different for all the people and hence, they should be ethically followed to make the right decision.
The criteria for selection of good stocks are discussed below. There are fundamental and technical terms involved in this process and the penny stocks have to fulfill a certain criteria to find out the most appropriate results.
Important requirements to study a company are:
- Product: The services or product offered by the company requires the maximum research. You need to see whether the offering of the company has effective requirements among people and are demanded in huge number. If the company produces best products or gives most required services, the probability of its success increases.
- Profitability: Company’s profit rates and stock prices over a period of three or more years needs to be calculated. The debt levels, assets and financial condition should be taken into reference.
- Management: The management strategies and key persons of the company should be considered as the associated people with diligence and good reputation always give better results to the company. The financial reports can be viewed to get the better idea about the finance management of the company. CEO is the key person of the company and his/her reputation matters the most in bringing the better status of the company.
- Resilience: The robustness level and potential to withstand inflation is important to be considered for finding the company’s stats.
Technical analysis to select the best stocks
Technical analysis is essential to uncover the best stocks for investment. It attempts in determining the futuristic price trends of any share by analyzing its history and trade volumes. There are many indicators for showing the real stats of the company in the market sectors. The use of these technical analyses can indicate the present achievements of market sectors and helps the investors in selecting the best stocks belonging to a specific sector. The commonly used technical indicators are averages, pie charts, trend lines, bar graphs, supports, volume, relative strength, oscillators and stock patterns. These indicators are represented in different forms and the internet software applications are designed specifically to meet these technical usages.
Penny Stock Arguments
The thinking of investors about penny stocks is different. To begin, they need to understand the real definition of penny stocks. These are similar to other stocks available in the market, but the important difference is that these are cheap in prices (below $5 per share). Actually, the new and small companies issue these shares as they have smaller market cap than other stocks. This is the major reason of the low pricing.
Penny Stocks vs Other Stocks
Penny stocks are quite affordable. There is more scope of the new companies to grow with appropriate trends and the share prices of young and prosperous groups become higher. The stocks grow up to 400% within less time. Small cap stocks are less prone to the huge market movements. The majority of penny stock companies are failure as there is high volatility and low liquidity levels of these stocks. The stocks are risky but it doesn’t mean that they are worthless. There are 2-3% actually reliable companies having actual scope and smart investors do their homework in finding the most reliable stock to invest their money.