Buy Penny Shares

What are Penny Shares? 

We often hear the expression to ‘buy penny shares’ without really knowing what that means. Penny Shares are simply classified as shares costing less than 100 pence in a company with a value of less than £100 million at the time the shares are recommended.

In addition it has a bid-offer spread of 10% or more of the offer price. What that means is the difference between the buying[bid] and the selling[offer] price of the same shares. It is usually quoted in pence or as a percentage.  

 What that means is if you had to sell your penny shares very soon after buying them, the selling price will be at least 10% less than the price you paid. In other words you will make a loss!!

The reason you want to buy penny shares is obviously to make money.  Please accept the fact that this is unlikely to happen quickly. It will happen if the company you are investing in does better, and that will of course make the share price rise.

You need to understand that the companies who fit the Penny Shares description will probably have a small amount of net tangible assets, and very likely not have been in business for very long. On the other hand they could be a well established company that has been experiencing some difficulties

In some respects Penny Shares in a new company may be the less risky alternative.

It is the risk that is part of the attraction when it comes down to penny Shares to buy. If you can afford the loss it is much more exciting to invest in penny shares than in a large blue chip company with huge assets and a trading history.

Research is the key if you want to find the best penny shares to buy, and today you can find much of the information you need online, and via newsletters and information sheets.