Take Care While Investing In Penny Stocks..!

Penny stocks (Shares) can give sudden fillip to portfolio. But do not make these part of core holdings.

With Tv channels and financial newspapers reporting rise or / fall in stock prices daily, it is often difficult to take the right call while investing.

Value Stocks Vs Penny Stocks..!

There have been times when good stocks, often referred to as value stocks, have been beaten down because of bad market conditions. On the contrary, small stocks gain on small news.

Take, for example, what happened to Kingfisher Airlines. The announcement of  FDI (foreign direct investment) in aviation saw the stock rallying 70 to 80%. Though bad times for the company continue as more and more flights are being cancelled.

Mr. Sanjeev Zarbade, Vice-president, Kotak Securities, said,  “There is a case for including smaller, beaten down stocks in a portfolio as these may move up further if sentiments get better, and there is a cut in interest rates.”

Take Care..!

*  Put only surplus funds on risky instruments

*  Can choose value stocks in the mid-cap space

  

*  Keep a tab on the performance of these stocks either daily or /  every alternate day

   

* Exit these stocks if you have made 50 per cent or / even less profits in a few weeks, chances are they might crash

* Small Retail investors should opt for companies backed by strong management, business model and robust cash flow

Many financial experts say only surplus funds that you can afford to lose be put into risky instruments. So, the investments should be capped.

Mix of Large and Small Cap stocks.. !

At the same time, all small  investors look for high growth. So, there is a part of your portfolio that can go in for high risk high growth instruments, which can be a mix of large and small cap stocks, suggest experts. But, Zarbade advises retail investors should opt for companies backed by strong management, business model and robust cash flow. However, a handful of smaller stocks (three to five) can give a fillip to your portfolio. Being high beta stocks, smaller stocks have a huge upside, but yes, these have an equally big downside, too.

Mr. Sunil Mishra, CEO, Karvy Private Wealth, said, “Choose value stocks in the mid cap space instead. Importantly, you should have a high-risk appetite.”

Src: BS

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