Buy Penny Shares...

The expression Penny Shares is often used, and not everyone knows what it means. In fact it was only when a friend suggested I buy penny shares that I made an effort to find out just what that meant.

I discovered that penny shares are generally speaking shares that cost less than 100 pence in a company which at the time of recommending the shares have a value of less than £100 million.

As well as that each share has a price differential of at least 10% between the price you pay to buy a share, and the price you would sell it for.

This all sounds very straightforward and simple, and it is, but it is also risky.

Now to make a gain involves some risk, and it is up to the reader to do sufficient investigating about the company whose penny shares he wishes to buy before committing himself.

It is well enough known that there are really only two reasons that shares are valued at under 100pence. The first is because the company whose shares are valued isn't much good, and on the face of it, that is probably a good reason not to take the risk. On the other hand in a time of economic downturn the Company may simply have fallen on hard times. This is where research is so important before committing yourself to purchase. Your investigations may well show that the Company is under new management, and has a new direction, and in that case it may be very well worthwhile making an investment.

The other reason for a low share value can be because the company is so new that it doesn't even have an established track record. With nothing to go on, the shares are bound to be marked low. Let us suppose in the course of your investigations a company is new, it is a mining company, and you find it has found coal on the Falklands, that would be a reason to invest or a new pharmaceutical company is testing a drug to reduce Autism. That may be worth an investment.

One big reason for investing in risky penny shares and not a blue chip company with a share value of 14 Pounds Sterling, can be put quite simply.

A 50 pence rise in 50 pence stock doubles your money, and could see your 1000 Pounds Sterling become 2000 Pounds Sterling. A 50pence rise in stock worth 14 Pounds Sterling doesn't set the heart racing. Penny shares may be a gamble, but properly researched you can see a great profit.

Check out Buy Penny Shares.

Ian Smith has been advised for a long time to buy penny shares and has been doing a lot of research on the best penny shares. He is of pension age, and was looking for some extra income to fund his vacations. He suggests you check out http://www.buy-pennyshares.com.

Article Source: http://EzineArticles.com/3230905

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