Anybody got any experience of dealing with Penny Shares

geek84

Hi Folks

I live in the UK and was wondering if anybody has any experience of dealing with Penny Shares?

Is it a good investment - i.e. share prices rising constantly, or is it a bit of a 'risky' business.

Your thoughts would be much appreciated.

Linton

It is very risky - very good chance of large swings, or even company going bust.

There are other problems:

1) Large difference between buy and sell prices - so the shares need to rise a lot before you are able to sell at a profit.

2) Illiquid market - the number of shares you can buy or sell at a time may be very limited. Thus if the shares are falling you may not be able to sell at any price.

Not something for the inexperienced IMHO.

Mikeyorks

geek84 wrote: »

Is it a good investment - i.e. share prices rising constantly, or is it a bit of a 'risky' business.

It's neither of those. It's a lot of a 'risky' business!

I have a small folder full that I bought some 20 years ago. All heavily tipped ....... all now totally worthless. Some have gone through so many permutations of takeovers / mergers / share consolidations .... that I've lost track of them. A company supplying agricultural machinery to the US at the time of purchase .... morphed into an Asian cinema chain a few years later! (and with naff audience figures?)

Don't go there ....... it's the 'grass is greener' scenario (and without my agricultural machinery to cut it!)

tonydee

Agree with the sentiments above.

I'm really unsure of the fascination with 'penny shares'? You can still lose 100% of shares priced at 1p as you can with shares priced at 1000p.

JoeCrystal

Well, I do hold penny shares and for an example, one of my investments have seen it return dropped to -70% before rebounding.

But on other hand, great gain can be made like other investment which seen it return soared to heady height of +210%.

The parable is the penny shares are very volatile and really should be avoided if you are looking to make long term patient returns. But as it is, great returns means greater risks. You can either soar to great gains or glide and fall to icy depth of total loss.

Both companies are making losses and their futures are very uncertain. Perfect candidates for penny shares.

Beside, penny shares are most likely companies that are clinging to within an inch of life, making losses, hoping to make good it business. I am not sure what the chances of doing well on penny shares are. One company will be the glittering diamond and other ninety nine will disappear beneath it murky surface, never to be seen again.

Cheers

Joe

Shatners_Bassoon

tonydee wrote: »

Agree with the sentiments above.

I'm really unsure of the fascination with 'penny shares'? You can still lose 100% of shares priced at 1p as you can with shares priced at 1000p.

High-Risk = High Return

That's what you have failed to understand and see the fascination of. There is little or no money to be made on the main FTSE markets safe 100 and 250 companies.

Look at RKH who were 30p in May 2010 and hit a high of 540p in Aug/September. That is nearly a 15x return and you simply do not get that on any other market other than the AIM market.

geek84

Hi Folks

Many thanks for your opinions.

I have read on a few forums that you can make good quick profits on Penny Shares.

However, after reading some of your comments, I will definitely think twice before making any kind of investment in Penny Shares!

Rollinghome

Shatners_Bassoon wrote: »

There is little or no money to be made on the main FTSE markets safe 100 and 250 companies.

By the common definition Lloyds and RBS are both 'penny shares' and FTSE 100 companies.

mike88

There are a few here who buy penny shares and probably many more who have lost money on them. Many buyers of penny shares think that they can make money on penny shares through stringent research but in reality those who profit do so more from luck than good judgement. Buying penny share is more akin to gambling than clever investing.

Most penny share buyers hang on to their shares for too long and eventually lose money. There are many articles on this. Google amateur investment psychology and a few should come up. If you like to gamble go for it but don't be fooled into thinking that you are any better than the investment professionals. If you do strike lucky, sell when you make a profit. If you begin to lose money you should sell. Introduce a stop/loss system because, although penny shares can rise quickly, they can fall just as fast.

By penny shares I mean those listed on the AIM market.

black_taxi_2

the spreads (charges)can be huge and difficult liquidity when trying to SELL

if i buy its longterm SIPP where most penny shares can only be bought

ave--1k to 2k max invested

wriggly

Shatners_Bassoon wrote: »

High-Risk = High Return

It's true that "High Return = High Risk". If the expected return is high, it is nearly always because there is higher risk.

What you state, that high risk means a high return, is not true. Otherwise, where is the risk?

Apart from all the other comments, "penny stocks" usually have fewer shares and are more illiquid, leaving their investors vulnerable to price ramping or manipulation.