Chapter 2: Your Risk Tolerance and Penny Stock Investing - Your Risk Tolerance
As we mentioned, it is all up to you, now to determine what your risk tolerance is. That means that you need to truly understand how much risk you can handle. This will help you to understand if in fact the penny stock is the right type of stock for you, specifically.
So, whats your risk tolerance? To determine this, you need to take into consideration how important the money that you are investing in means to you.
If you lose this investment, will you be okay as far as financially speaking?
If you lose this investment, is there a method for you to re-coop your money?
You should understand that investing in penny stocks means that you should be able to right off your funds and not have to worry about them. Sure, no one wants to lose their money, but if you can safely say that it would be okay for your livelihood to lose it, then it is okay to invest in it. Your risk level is much higher.
Those that have a risk tolerance that is higher are those that can benefit the most from penny stocks. Those that have a lower risk level should tread lightly in the way of penny stocks. Simply, you need to know that it is okay with you to tap in and lose that money.
Even though you will do your best to insure that this does not happen, you still need to insure that you can do okay if it should happen to you.
In other words, companies that are valued higher than this amount, those that have more inventories, for example, are those that regularly trade on the stock market.
Penny Stock Fortune
It is hard to say that one company or the next is the best one to go with, but the bottom line is that you can always find the fresh guy in the bunch.
You also want to know if the company is real and not just someone on the other line to answer just in case an investor calls. If you remember, we talked about how with most penny stocks, the markets do not have strict restrictions on what and who can be sold on these markets. They are usually set in what their business is as well. Therefore, will he sell you a stock that is not doing well? Your goal will be to find legitimate companies that do trade with pink sheets rather than on the big stock markets.
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