Everything you need to know about Penny Shares
Welcome to UKInvesting.co.uk were you can find the latest information about investing in Penny
Trading in penny shares is one of the most exciting ways of investing money. If you are able to
spot a good investment opportunity you can experience the pleasure of watching your shares rise
in value from a few pence to a few pounds.
When investing in shares the idea is to buy a share at a low price and then sell it later at a
higher price, thus making a profit. Good luck with your investments.
Trade with Caution
When you consider that the overwhelming majority of companies start out as penny shares before
growth has turned them into successful concerns you can see the attraction.
While it is an exciting way of investing money it is fraught with danger. In general, penny shares have a thin market. A stock
priced at 10p may rise 50% as a result of some good news, whereas a larger blue chip concern will not.
On the other hand, the penny share can fall far more suddenly and steeply than the larger stocks and its price at any given time
may bear no relation to the stock's underlying value.
Basically, investing in penny shares (penny stocks) is all about sifting through the masses of shares and pin-pointing a company
that, for you, shows potential.
Ideally a penny share that is worth investing in will have a net asset value per share that is higher than the share price itself,
but sometimes it is worth while dipping in and out of shares when the time is right.
Companies which have seen their share price tumble significantly,
but show potential for a return to the good old days. More on recovery shares.
These rise and fall in value according to the economic climate or
maybe a business cycle. Investors will ideally invest in stocks at the bottom of the cycle before the next upturn.
The opposite of cyclical shares, these are stocks that do well in times of economic depression and can be found
in industries such as food and utilities, things that consumers tend not to cut back on in difficult times.
Often fewer that 10% of these companies' profits reach development stage, but just one could send the share price rocketing.
In assessing the potential of any company, look out in particular for strong business plans and results; trading volume; a trend of improvement; and high visibility –
a company which publishes regular financial reports.
An exceptionally volatile area. Shares rise and fall rapidly in short periods
of time because these companies offer little or no tangible assets to provide stability.