Pennystocks at a glance

Should you trade stocks for a few cents in 2021?

Pennystocks — these are stocks that are traded for a few cents, i.e. for a few pennies, the English word for penny. Often these are companies that are on the verge of bankruptcy or are already bankrupt . In principle, all stocks in the eurozone are penny stocks that are worth less than one euro. Some actually only cost a cent. A price increase to two cents is already a doubling of the price. Nevertheless, these stocks are anything but a risk-free investment.

Rich with Penny stocks

Deposit insuranceThe famous stock market journalist and speculator André Kostolany once made a lot of money with penny stocks . At that time, after the Second World War, it was actually not about stocks, but about bonds . But the principle with which Kostolany was successful was the same as when buying penny stocks. Germany had lost the war and German foreign bonds were almost worthless. Nobody expected that the country would ever be able to repay the debt — or would ever want to. But Kostolany believed that the young Federal Republic would repay its debts in order to have further access to the capital market in the future . In fact, the federal government canceled the repaymenton, the rate rose from the 250 francs at which Kostolany had bought to more than 35,000 francs. But not every junk bond or share is doing so well, and Kostolany was often wrong.

Pennystocks as an alternative?A security is not always worth as much as it seems. This applies to banknotes as well as to stocks.

Conclusion: The stock market guru Kostolany once started with so-called penny stocks. But these papers must be treated with absolute caution, because Kostolany was often wrong with his assessments and was only able to compensate for the frequent losses with very high returns on the winning papers.

André Kostolany got rich with German junk bonds. But not every penny stick is doing as well.

What exactly is a Penny stocks

Pennystocks at a glance

First of all, a penny stock is a stock that is worth less than one unit of local currency , i.e. one pound in the UK or oneadvisoryEuro in the Eurozone. In the USA, the term is somewhat broader, where all values ​​at rates below 5.00 US dollars are considered penny stocks.

The term junk shares is often used synonymously. In fact, most penny stocks are also stocks of companies that are on the verge of bankruptcy . Up until the 1990s, shares had a nominal value of mostly 50.00 marks, more rarely 100.00 or 1,000.00 DM, and the stock market price was much higher. The minimum nominal value was later reduced to DM 5.00, later no-par shares were introduced. As a result, even halfway healthy companies can now cross the penny stock limit more quickly .

Historical stock exchange prices

Until the 1990s, prescribed nominal values ​​ensured that the shares were more expensive than they are today, with penny stocks correspondingly rarer.

But even if not every share with stock exchange prices below one euro has the same junk status, you won’t find successful companies there. At best, investors can hope that the stock is undervalued, meaning that the situation is not as bad as the price.

Conclusion: The term pennystock comes from the fact that the current price of the share is below the unit of a currency. While in the USA papers with a value of less than 5 $ are called penny stocks, in Europe stocks with a value of less than one euro or one British pound are denoted.

Pennystocks are mostly shares of companies in crisis, even if the way to the Pennystock is shorter today than it was 20 years ago due to the elimination of the high nominal values.

Earn money with Penny stocks

FeesAt Pennystocks, investors hope that the company will still escape bankruptcy . Even in the case of stock corporations that are already insolvent, some of the shares can still be traded, but only on the open market.
Because a bankruptcy is not always the end of a company. The creditors may be willing to reschedule. And even in the event of a liquidation , it is possible that after the sale of machines, patents and trademarks and the payment of debts, there will still be money left over for the shareholders. But you shouldn’t expect that, because no matter how many assets the company has, it usually does not become insolvent.
In particular, stocks worth a cent or two are the focus of interest for many investors . Apparently a share quoted at a cent can only go up, but of course it can also become worthless.

Conclusion: Because the value of a penny stock is already so low, investors and speculators assume that the price cannot fall any further, as company values ​​are often still suspected. If these are sold, however, the company’s creditors are served first and, in a second step, the shareholders. It can happen that stocks become completely worthless.

When trading penny stocks, the principle of hope is paramount.

Caution, Fraud!
Because of their low value, penny stocks are a popular target for scammers. Because the market value is low, these can be a large one relatively easilyto knowBuy number of shares. Then the price is driven up by advertising, especially by so-called stock spam , i.e. emails that advertise alleged insider tips. This is often justified flimsy, for example with an alleged legal win or successful insolvency proceedings. Insider tips for penny stocks can also often be found in forums , but there, too, the same calculation is often behind the contributions.

The interest in the junk shares is great, as the bankruptcy of the DIY chain Praktiker shows. After she filed for bankruptcy, sales soared, around a third of the shares were traded in one day. Many shareholders wanted to save at least part of their assets and speculators hoped for a miracle a la Kostolany.

Conclusion: If you happen to be the recipient of an email with a possible insider tip, then you should pay attention and, above all, keep your hands off it. Especially if the tip is a penny stick. Then often only the senders of the email win who have long since sold their shares, even before you notice the fraud and get stuck with the junk shares.

Scammers often advertise penny stocks in emails as an alleged insider tip. If the price rises, they sell the share. The alleged bargain usually turns out to be worthless.

Where can you get penny stocks Act?

Pennystocks at a glance

demoIf you want to trade penny stocks, one thing is especially important: a broker with low trading fees . There are providers who do not bill according to trading volume , but according to the number of shares traded. And here, too, there are brokers who charge low fees and banks, which sometimes charge horrific sums when trading penny stocks. A broker who can score with very low fees is Lynxbroker, based in the Netherlands.

The company was founded in Amsterdam more than ten years ago . According to its own information, the company currently employs more than 100 people. Part of it is also in Germany, because in addition to various branches , there is also an office in Berlin. The German customer support also takes place from here . More than 30,000 customers trust the Dutch financial services provider. And there are good reasons for that. For example, US stocks can be traded at an unrivaled price here. For example, while a well-known German company charges Apple shares worth $ 2500 with fees of $ 30, the Dutch provider only estimates $ 5 per half-turn.

If traders intend to trade with penny stocks, which are often only worth a few cents, then Lynxbroker only charges one US cent per share. However, there is a minimum of $ 5 as a minimum fee. Although it cannot be said that the broker specializes in trading US penny stocks or pink sheets , the provider advertises it aggressively on its website. For example, providers claimed to have the largest selection of US penny stocks and advertised the sale of over 10,000 pink sheets. No other broker has such an offer .

Investors who decide to trade Pennystocks through Lynxbroker can feel safe. Your deposits are protected up to £ 48,000. Since the broker acts as the IB of Interactive Brokers, not only the customer funds , but also the stock accounts are protected. This at least with up to 30 million US dollars per person.

Conclusion: If you intend to trade with penny stocks, then you should choose a broker who can trade these stocks at low conditions. A provider should be sought who either bills according to trading volume or, like lynbrokers, only demands a few cents per traded share.

Conclusion

Pennystocks are highly speculative, they offer the chance of high profits with limited losses. However, losses are much more common than gains, and overall, most retail investors are likely to lose money. If you still want to get involved, you should not rely on alleged secret information from forums or emails and only speculate with money, which you can easily cope with losing.

Добавить комментарий

Ваш адрес email не будет опубликован. Обязательные поля помечены *