Jul 23, 2011

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Investing In High Risk Stocks

High Risk Stocks

High Risk StocksHigh risk stocks although quite volatile also give you the opportunity to get a much higher return within a shorter time. When you are researching for good penny stocks you are usually guided to invest in blue chip stocks which involve lesser risks but at the same time will give you only a moderate return. On the other hand if your risk tolerance is high and you have confidence in judging companies by their financial statements and other indicators then high risk stocks can get you very good profits.

One of the examples of high risk stocks which are gaining a lot of popularity are Penny stocks, which are usually traded below $5 per script. These stocks are also characterized by their fickle nature and can grow or decrease in value within a very short time. This sharp rise and fall gives the opportunity to make a good profit in a shorter period. The point is to ride the rising wave and sell the stock just before it starts to go down. However one should realize that as the name suggests, this is a high risk trading and there is a very good chance of losing money as well.

Selecting High Risk Stocks can be tricky

Selecting high risk stocks can be a bit tricky but there are certain pointers which usually work. One of the best strategies is to select stocks which have been observed to have an upward trend. Other factors will also have to be considered to make sure that this trend is maintained over a period. The next thing to consider would be the trading volumes of these stocks. Select stocks having a high volume of trade as that ensures availability of a buyer when you need to sell your stocks fast.

These stocks should also be selected on the basis of their EPS (Earnings per Share). This indicator will serve as a good pointer about the profitability of the company and a positive EPS will denote that the company is making good money. Consistent research and learning through experience are the two main components which can make your investments in high risk stocks very profitable.

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