Watch the trading volumes of your penny stocks
Trading volume is simply how many shares trade for a particular stock. With penny stocks
, the trading volume can be low. The lower the trading volume, the more illiquid the share.
It’s a good idea to keep an eye on this every now and then.
This will allow you identify when the liquidity of a particular share is falling, which could be worrying. And if volume is high and you want to buy more, it can be a good time to do it without the price changing too much.
Make sure you have a diversified portfolio of penny stocks
You should hold a diversified portfolio of penny stocks. Every now and then you should take the time to check this diversity and rebalance your portfolio if necessary.
For example, you own a portfolio of ten different penny stocks. If one of those stocks does fantastically well, it means your portfolio is heavily weighted towards this performing share.
If this is the case, you should sell out a chunk of your shares to restore the balance in your portfolio and invest in other shares with the proceeds.
Don’t overtrade penny stocks
Overtrading is good news for your stock broker, but not good news for your portfolio. This is because the charges add up.
Make careful buy and sell decisions when it comes to your penny stocks.
The wider bid offer spread on penny stocks also means your shares need to perform even better just to breakeven.
Don’t worry if you invest in a penny stock flop
No investor is perfect and you will invest in your share of flops along the way. With penny stocks, this risk is higher.
If and when this does happen, don’t beat yourself up about it. It’s just one of those things. Learn from it and move on.
So there you have it. How to manage your penny stock portfolio.
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