Being a new investor and hearing a huge hype about people making thousands of dollars overnight, i thought i was too smart and could make millions in a few days. I started off with about $5000. Invested some in Citibank (C) and remaining in penny stocks. The penny stocks were so volatile that I was always worried what was about to happen. One morning i used to see one stock suddenly up 50% and in 2 hours down 30%. Even though i tried to sell several stocks at higher rates, most the times I was unsuccessful. then i started concentrating on 1-2 penny stocks and after what i thought was the right opportunity, i put all remaining money in 1 stock. Next day stock went down 40%, i thought i will come back up soon only to see in 1 week, the stock loosing more than 85% of its value! I finally got rid of the stock and now focus only on high quality, fundamentally good stocks and its been going much better and a much better peace of mind since then!
so for all the new investors or early investors, my sincere advice to you is:
1) Initially only trade on good / high quality / well know stocks
2) Do not get greedy - always diversify your money in several stocks
3) Buy for long term as much possible if you are not an expert - this is one of the most common mistakes by new investors
4) Do good research before buying a stock. Think as if you are buying that company and not the stock.
5) Do not rush, there are always very good opportunities!
You have summarised the must dos of penny stocks investment. Just to add your list I think it is also very important to have an entry and exit strategy and keep a check of your emotions.
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