Personal Money Management 101

Penny Stocks and Shares

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  • Penny Stocks (Penny Shares) are low priced (typically <$1 or £1) shares in small / start-up companies.
  • Small changes in price represent large percentage changes
  • High risk, but high potential growth (and - of course - losses).
    • Expect to take some losses as well as gains.
  • Markets may be less liquid -
    • may not always be able to buy and sell.
    • higher dealing charges, bigger spread (difference between buy & sell price).
  • Things to watch for :
    • Asset rich stocks, ie net asset value exceeds share price;
    • Recovery stocks, stocks that have been through hard times but have taken steps to turn things around, eg appointment of new management;
    • Technology stocks, eg Internet or biotechnology. IT stocks have not fully recovered from the 2000 dotcom meltdown - but the 'net isn't going to go away. By being selective and identifying future winners big gains can be made.
  • Beware of brokers trying to push you into buying stocks
    • they might be genuinely helpful, but
    • they could be trying to make a quick buck by offloading stocks they bought cheap.

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