Which is a better investment: penny stocks or value stocks?
Stocks are an attractive investment option, but which type should you buy? SEBI registered stock tips provider can help you. In this article, you’ll find out the difference between penny stocks and value stocks and how each one can help you grow your money.
What are penny stocks?
Penny stocks are low-priced securities that trade for less than $5 a share. Although penny stocks generally are considered to be riskier investments, they also may provide a greater opportunity for price appreciation than do some blue-chip stocks.
Why might an investor consider buying penny stocks? A key reason is that these stocks typically are much less expensive than are shares of even the largest companies. For example, as of mid-2018, the share price of Microsoft Corporation (MSFT) was about $106, while the average price of a penny stock was around $3.50. Thus, an investor could buy more than 30 shares of a penny stock for the same amount of money that it would cost to purchase just one share of MSFT. Of course, the value of the MSFT share would need to increase by only 3% for the investment to break even, while the penny stock would need to increase by more than 100% to reach that point.
What are value stocks?
There are two main types of stocks: growth stocks and value stocks. Value stocks are stocks that trade at a lower price than their true worth. They may be undervalued by the market, but they have the potential to generate high returns for investors.
Penny stocks are a type of value stock. They are typically low-priced and may be undervalued by the market. However, they also come with a high degree of risk. Many penny stocks are not traded on major exchanges, which makes them more volatile and harder to sell.
So, which is a better investment: penny stocks or value stocks?
It depends on your investment objectives and risk tolerance. If you’re willing to take on more risk for the chance of higher rewards, then penny stocks may be a good choice for you. However, if you’re looking for stability and lower risks, then value stocks may be a better option.
Problems with penny stocks
Penny stocks are notoriously volatile and risky, and it can be very difficult to find reliable information about them. They are also often subject to scams and pump-and-dump schemes. For these reasons, many investors steer clear of penny stocks altogether.
Problems with value stocks
When it comes to investing, there are a lot of different strategies that people can use. Some people prefer to invest in penny stocks, while others prefer to invest in value stocks.
However, there are some problems with value stocks that you should be aware of before you make any decisions. First of all, value stocks can be more volatile than penny stocks. This means that they can go up and down in value more rapidly, and you could end up losing money if you’re not careful.
Another problem with value stocks is that they can be harder to sell than penny stocks. If you need to sell your shares quickly, you might not be able to get the price you want.
Conclusion
Penny stocks may be more volatile and risky, but they also have the potential to provide greater returns than value stocks. For investors willing to take on a higher degree of risk, penny stocks may be the better investment. However, value stocks are still a solid option for those who prefer a more conservative approach.