buying '000's of cheap shares in company not on FTSE100

longwalks1

Watchnig a few lesser known companies who's shares are between 6p and 10p, and rises of 1p so a great return (potentially). Are there any additional risks involved in buying say, 50,000 shares in one of these companies as opposed to shares in a larger company?

Thanks in advance

p00hsticks

Having a low cost per share isn't necessary the same as them being cheap in the sense of them being good value.

Reaper

britishboy wrote: »

Watchnig a few lesser known companies who's shares are between 6p and 10p, and rises of 1p so a great return (potentially). Are there any additional risks involved in buying say, 50,000 shares in one of these companies as opposed to shares in a larger company?

Yes. They can go down 1p just as easily. Small companies share prices tend to be much more volatile than big companies.

mr_fishbulb

And can suffer from illiquidity too. You may find you are unable to shift them easily if things turn sour.

Rainmaker_uk

If you buy 100,000 shares at 2p this will cost £2000.

If they go up 1p you will make £1000
If they go down 1p you will make £1000
If they lose 2p you have lost everything.

Big gains and big losses - your call :eek:

Loughton_Monkey

Watch the huge Bid/Offer spreads. They can be as high as 15% or more, and so they have to rise by this amount to get your money back.

googler

Potential for big gains, but I'd only buy with a positive indicator that would take the price up. Wouldn't buy them just for the sake of it.

If the 'positive indicator' has reached the press, or is in the 'News' section of commentary websites, the price has usually gone up by then, and you've missed the boat for the biggest gains.

longwalks1

googler wrote: »

Potential for big gains, but I'd only buy with a positive indicator that would take the price up. Wouldn't buy them just for the sake of it.

If the 'positive indicator' has reached the press, or is in the 'News' section of commentary websites, the price has usually gone up by then, and you've missed the boat for the biggest gains.

Cheers people

googler by 'positive indicator' do you mean the advise bit on sites like digitallook? for example 8 strong buys, 1 neutral, and 2 sells, something like that?

Forgive my lack of knowledge only really been dealing in 2 companies so far

longwalks1

mr_fishbulb wrote: »

And can suffer from illiquidity too. You may find you are unable to shift them easily if things turn sour.

mrfishbulb

you say struggle to shift them, say i bought 100,000 shares at 10p, they done nothing for 6 months and i wanted out, and they were still at 10p, i could just sell them all for 10p, right? (i know i'd pay trading fee and stamp duty on them tho). Or would there be a chance i say sell them all, and not all sell, is that right?

Thanks again

Linton

britishboy wrote: »

mrfishbulb

you say struggle to shift them, say i bought 100,000 shares at 10p, they done nothing for 6 months and i wanted out, and they were still at 10p, i could just sell them all for 10p, right? (i know i'd pay trading fee and stamp duty on them tho). Or would there be a chance i say sell them all, and not all sell, is that right?

Thanks again

For small companies you may find that there is a maximum number of shares you can sell at the quoted price. If there are very few trades you selling say a tranche of 2000 could depress the price.

Mikeyorks

Rainmaker_uk wrote: »

If they go up 1p you will make £1000
If they go down 1p you will make £1000
If they lose 2p you have lost everything.

That's a cute deal. Can you list your broker?