Penny Shares

Hi,
I am thinking of investing in penny shares but there's so much information don't know where to start. Came across this Penny Shares And Small Cap Company Information from City Equities does anyone have any advice, tips etc?
Thanks

Any particular reason why you have chosen penny shares?

not really, main reason is because i've never done anything like this before so penny shares seem like a good place to start because they don't involve too much money

When you say that you have never done anything like this before are you referring to trading Penny Shares or Trading in general?

If its the latter, then I would SERIOUSLY suggest you leave Penny Shares alone and instead concentrate on less volatile stocks such as those in the FTSE100 / 250.

The initial assumption by many newbies (including myself once when I began trading) is that trading Penny Shares will cost you less money with less risk associated as the price of the stocks is so low. In reality this is far from the truth!!! One of the key reasons for this is lack of liquidity. Trying to become consistantly profitable trading these type of stocks is a VERY difficult game and as such are best avoided !!


All IMO,

Chorlton

For £100 you could buy a thousand penny shares or 20 "normal" shares. They will still cost you £100.

Chorlton's advice is excellent. A penny share will have to do very well to recover the losses you incur in dealing expenses, slippage due to lack of liquidity, and poor bid-offer spreads.

*Chokes on my coffee*

With penny shares you are investing in companies that do not make a profit, probably have huge debts and are clinging to within an inch of life. This is why they cost pennies.

Generally they can be very illiquid - selling them will be a lot harder than buying them and the spread of such shares can be up to 75% of the value. Also the dealing costs are higher than say FTSE 100 shares.

You are effectively gambling that the company recovers or makes a breakthrough. Perhaps 1 in 100 will and you'll make huge profits on it - but the rest will fade into oblivion.

Did you become a client of theirs in the end? how did you get on?

My advice: stay away from penny shares. Buying them may be easy, but selling them won't be due to lack of liquidity.