Do you want to spend a penny and become wealthy? If yes penny stocks can help you. What are penny stocks? How can it make you wealthy? Well, before answering these question let’s take a quick look at the performance of the stock market in 2016.
The year 2016 was an average year for the stock market. Sensex was able to generate only 6% return in 2016. Many stocks are trading in a red zone. However, few penny stocks have generated extremely good returns for the investors in 2016. In this post, we will take a look at 5 best performer penny stocks of 2016. In addition to that, we will also understand investment strategy in penny stock.
What are Penny stocks?
- Penny stocks are stocks that are available at a cost of penny.
- These types of stocks are highly speculative in nature.
- A risk-return ratio of penny stock is very high.
- Penny stocks are like two edge sword it can make or break your portfolio.
- Penny stocks are typically growing company with limited cash and resources.
It is extremely difficult to identify good penny stocks for the investment. It requires a lot of skill, understanding, and knowledge about the stock market. The method to identify and invest in penny stock is given below.
Investment strategy in penny stocks
Ignore penny stock success stories
Never invest in penny stock based on the past performance and success stories. You will defiantly lose money if you invest based on past success stories. Penny stocks are usually derived by manipulators and scammers. A possibility of losing money in penny stock is very high if you invest in stock based on past performance only.
Never Invest in penny stock based on tips
The second strategy to follow is avoid investing in penny stock based on tips. There are many experts that keep on sending e-mail and SMS as a stock recommendation. They are touting on these type of stocks aggressively and it may lure you to make an investment. You should stay away from such tip based investing.
Do your own research
You should understand and do your own research before taking any position in penny stock. Check each and every detail with a magnifying lens. Never ever dive into unknown territory and cynical stocks.
Never hold penny stock for longer period
You should never hold penny stock for the longer period. These types of stock are for short term trading and not for investment. If penny stock has generated 20% to 30% return you should sell it. Holding these types of stock for the longer duration is not advisable.
Focus only on High volume stocks
As this type of stock is risky in nature you should focus on the stock that is traded on high volume. It will be very difficult to get out from the stock if it is traded on lower volume. You can get volume transaction data from BSE and NSE website.
Never invest in penny stock if you are beginner
As a cost of these stocks is very low it always attracts you for the investment. However, you should be extremely careful while investing in these stocks. If you are a beginner in the stock market you should avoid Investment in the penny stock.
After going through Investment strategy in penny stocks let’s take a look at Best performing penny stocks of 2016.
10 Best penny stocks of 2016 – Up to 1000% return
Supra Trends – Supra Trends is first best-performing penny stocks of 2016. Supra Trends has given 1150% return in the year 2016.
Gujarat Toolroom Ltd – Gujarat Toolroom is small engineering sector company. Gujarat Toolroom has given 1079% return in the year 2016.
DCM Financial – DCM financial is non-banking finance company. DCM Financial is first best-performing penny stock of 2016. This stock has generated 318% return for the investor in last one year. However, it may not give a similar return in future.
Gayatri Sugars – Gayatri Sugars is next best-performing penny stock of 2016. Gayatri Sugars has generated a magnificent return of 276% last year.
P M Telelinks – P M Telelinks deals in steel and iron trading. The stock of P M Telelinks stock has generated 223% return in the year 2016.
Century Extrusions – Century Extrusions is next best-performing penny stock. Century Extrusions is leading aluminum extrusion and profile manufacture. Century Extrusions has given 169% return in the year 2016.
Continental Controls – Continental Controls is in electrical equipment manufacturing. The stock of Continental Controls has given 132% in the year 2016.
Should you invest in penny stocks?
Investing in penny stock is like gambling. You are investing money in the company with no fundamental in the hope of earning a big return. Penny stock is high risk, high reward game if you are conservative investor it is a big no for a penny stock.