Tips for 'Penny' Share investing

Friday, 6th March 2009 15:07 - by GedW

The mystery unraveled! My idea of a penny share is a share trading for pennies. That is, shares trading for less than £1, but some will claim they are shares you can buy for under 50p, some claim less than 1p. There is no definitive answer. What is for sure is that penny shares present an ideal investment opportunity if some basic rules are followed. Who are penny shares for? They are for those who want to make a fortune, surely? There is no doubt history tells us that many fantastic penny shares have turned a few hundred pounds into thousands, indeed, hundreds of thousands of pounds. Many, though, just turn to dust. So what are the rules for penny share investing? o Rule 1: Are you cut out for penny share investing? What are your motives? How risk-averse are you? If you cannot take a risk or sleep easy at night worrying about your investments then leave well alone, as the greater the reward, the greater the risk. o Rule 2: Make proper future financial provision. Look after the rent or mortgage and bills first and never invest the housekeeping in penny shares. Be prepared to lose most of your invested funds if your investment decisions go ‘pear shaped’. o Rule 3: Only invest what you can afford to lose. o Rule 4: Never ever borrow to invest, that is the quickest way to poverty. o Rule 5: Research, research, and research again for companies that look like making the grade, finding a stock-picking technique that suits you. The clues are there - just let the market ‘blinks’ (as I call them) point the way. o Rule 6: Set a stop-loss to protect your investment from any large downside, and always take some profits when they present themselves.