How to start investing in penny shares

Julie Brownlee, Fsp Invest, 01 Apr. 2015

Tags: penny shares, penny share, penny stocks, investing in penny shares, how to start investing, how to start investing in penny shares, investing,

By investing in the best penny shares out there, you have the chance of making substantial profits.

So what exactly are penny shares? And how can you start investing in them?

Read on to find out…

What are penny shares?

Generally speaking, a penny share is a share trading on the Johannesburg Stock Exchange for less than R10.

Penny shares tend to be small-cap, fast growing companies. You can find penny stocks in the JSE’s small-cap index or on the JSE’s AltX. Many of these companies are young.

Penny shares can be more risky than their larger stock market counterparts. This is because they tend to be very niche, focused companies that are ploughing money into their products and services. And this can make them more vulnerable.

The number of people investing in these shares can also be low. If this is the case, the shares can be quite illiquid. This means if you buy shares, you may find it hard to sell them. But before investing, you can check this out.

How to start investing in penny shares

If you want to invest in penny shares, as with buying other shares, you’ll need to do it through a stock broker. If you don’t have an account with a stock broker yet, read this article to find out more.

You’ll also need to decide what shares to invest in. You’ll need to do some thorough research into the companies that interest you. Sometimes with smaller companies, it can be more difficult getting your hands on all the information you need.

Focus on companies that are showing great potential, are growing their profits and expanding their businesses.

It can be wise to stay away from very new companies as they won’t have much for you to look at in terms of finances and history. You want to look over a few years of accounts at least to see what’s going on and to gauge what might lie ahead.

So there you have it, how to start investing in penny shares.

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