Introduction:

Penny stocks carry volatility risks and there is a very high degree of uncertainty associated with these stocks. Some of the risks associated with penny stocks are pump-and-dump schemes, liquidity challenges, and the potential for stock manipulation.

Despite the risks, penny shares have gained some popularity among investors in India, largely due to their low prices and their scope to provide massive returns. Penny stocks do not have any fundamental backing and are a pure play of luck if any of them win in the markets.

Open Demat Account and Start Trading!

However, if you are keen on investing in penny stocks, here are a few tips on how you can make money in penny stocks over time:

• Ensure to buy penny stocks only in a bull market. In good times, there is a higher money supply in the market and a general sense of optimism in the market, so if your penny stock will rise, it will be in an upward market.
• Look for sectors that will outperform in the next year and try to pick penny stocks from that sector.
• The next thing you can look at is fundamentals. Companies with high sales growth as well as profit growth show a strong potential to grow. Ensure that they have low or almost no debt.

How should you invest in penny stocks?

• Do not allocate more than 20% of your portfolio to penny stocks. These are very risky bets and it's quite likely that you will end up losing money in these stocks.

• Do a risk and reward analysis. Do not invest in stocks when they have already had a big run. Try to invest when they are undervalued.

Based on the above parameters, here is a list of 5 penny stocks that are priced under Rs 2 and have the potential to provide good returns in the times ahead.

Gemstone Investments Ltd

Gemstone Investments Ltd operates as an NBFC, focusing on investment activities and catering to the credit needs of the unorganised sector through equity investments in equity shares, debt instruments, and listed/unlisted securities.

Veerkrupa Jewellers Ltd

Veerkrupa Jewellers Ltd manufactures and trades various types of gold and silver jewellery products, sourcing ready-made jewellery from manufacturers or wholesalers in Ahmedabad and selling them through its showroom and marketing team exclusively in Gujarat.

Sharp Investments Ltd

Sharp Investments Ltd is registered as a Non-Deposit NBFC, offering loans against shares and securities, inter-corporate loans, personal loans, trading in shares and securities, trade financing, loans against properties, and other financial activities excluding insurance and pension funding.

Kretto Syscon

Kretto Syscon Ltd operates in real estate and software development. The company offers services in construction, buying, and selling to leasing residential and commercial properties. Kretto Syscon is involved in both the real estate and software engineering sectors.

Vision Cinemas

Vision Cinemas Limited is into the cinema display and distribution industry. Vision Cinemas contributes to the vibrant realm of entertainment through its dedication to providing compelling movie experiences.

.Risks associated with penny stocks include:

• Low liquidity: Since many penny stocks are traded over the counter, liquidity is very limited. You may not be able to sell shares at times when you want to exit your position just because there are no buyers. These low trading volumes can result in substantial price swings even with small transactions.
• Limited historical information: Most penny stocks belong to young companies with no historical data. There is very little that you can verify about them over the internet.
• Lack of public information: These stocks often lack coverage by professional analysts, leaving potential investors with insufficient resources for informed decision-making. So, it's better to avoid such risks.
• Pump-and-Dump Schemes: The only people who make money in the penny stocks are the big guys. Promoters of such companies try to create an interest in these unknown companies. Inexperienced investors buy the shares, lifting the price. Once the price reaches a certain inflated level, these bad guys sell, or dump, the stock at a huge profit.

Read More:  Penny Stock in India 2024

Conclusion

It is a human tendency to make quick money and get rich fast. And that's why less than 1% of the people are billionaires. In the past, many big investors have earned huge returns by investing in multi-bagger returns. This is what most people are also looking to achieve. And by all means, this is possible but not without patience, skill and strategy.

So, if you want to invest in penny stocks with the hope of making big money from these stocks, you ought to do it with strategy. That being said, you must do thorough research, measure your risk appetite, and consult a financial advisor, to build a solid investment strategy.

Trending Blogs: Invest in Small Cap & Mid Cap Mutual Fund & Stocks | US FED’s rate cut announcements | Companies affected by Rise in Crude Oil Price | Fall in IT Stocks | Launch of 4 New Indices | Revised Lot Sie of Nifty Contracts | RBI Monetary Policy Committee Meet 2024

Related Blogs - Top sugar stocks to invest in India in 2024 | Best liquor stocks you can add to your portfolio in 2024 | 5 Best Banking Stocks to Invest in 2024 | Top 5 hotels stocks to buy in India in 2024

Popular Stocks:  ICICI Bank Share Price | HDFC Bank Share Price | CDSL Share Price | UPL Share Price | TCS Share Price | BHEL Share Price | Trident Share Price | IRFC Share Price | Adani Power Share Price ​​​​​​​