Press "Enter" to skip to content

Why penny Stocks fail to make investors rich?

Penny stock investments are always dicey for the investors. Your purchase of shares valued 10-cent with high volumes would sound very enticing. You might start feeling like an institutional class investor having a huge presence in the company. It is always irresistible to think that the penny stock will rise to a double the value and make your investments 100% higher in return.

The matter of fact is that the stock share price is dependent on company’s quality growth records. The company will get a promoted growth record only if it follows the documented rules. The consistent results can be obtained from the stocks with the best quality, growth levels and the institutional support from the investments. The stocks being traded at a higher value per share is expected to grow gradually and the portfolio managers prefer these stocks for the better ROI.

For an instance, a company having the per share value of $ 0.10 would require 500 million shares to accumulate $100 million stakes in the company. There are a very few companies which can accumulate these many investors and gain the market capital accordingly. Similarly, the companies with a higher per stock value will have the accumulation of a good market capital within less time and of course, with the lesser number of investors. So, in this case, there will be quality investors relying on a high-quality group for getting better returns.

However, it is not always true that penny stocks can’t make you rich. There are some fair companies having strong policies and they start getting more investors who trust them for the financial policies and positive statistics. The road for profit is not always smooth but the smart investor knows the right way to that particular path. Your choice for relying on a wrong company would always be negative for your money as if the company goes on to become bankrupt, it would also lead you to the same platform.

Going top-to-bottom and bottom-to-top

CEDC was the ticker symbol for Central European Distribution. The company had the highest value of the stock as 77.48 in July 2008. After the downfall in the market, the stocks fell to $ 0.77 in Feb 2013 and then it kept on descending and the company ultimately fell under the suspension list in April 2013. The company dealt in the export of wines and liquor distillers in Poland. It is actually about the track of the company to follow. Don’t just go for the quantity of your investment but look for the quality of your investment based on the bucks you have.

Let us take the case study of Apple now. It began at $ 24.94 with the highest liquidity levels. The company kept on growing at a rapid pace since then and today, it has got a remarkable position. Check the consistency of the companies before making an investment. Many renowned companies were once a penny stock and gained their status only with their strong policies and commendable ideologies.