Penny stocks, typically, available at a price under $10 or even below $5 have always been the favorite of many investors and traders. Although the appreciation in price may happen fast, resulting in high returns to the investor, the fall in share price could be equally quick. While the potential for the stock price to double is high, the risk is also very high in them. Since the risk-reward ratio is very high in them, the chance of losing a considerable portion of capital is also high in them.
Therefore, one should consider penny stocks only after careful analysis of the company’s fundamentals and other parameters. While trying to know what is the best stock under $10, make sure you get the reasons for the stock to trade at such a low price.
Also Read: US stocks to open lower ahead of Jackson Hole economic symposium 2022
Low-priced stocks may witness high volume leading to sharp price increases. This may give an impression that there is some fundamental change happening within the company. It is better to take a position in such stocks only after a full understanding of the price rise.
Before investing in cheap stocks or penny stocks, do try to find the reason behind the low stock price. Is the stock price languishing at current levels for a long time? What could have made the stock price fall to trade at under $5 or $10? answers to these may help you make an informed buying decision rather than take an ad-hoc position in the stock.
If there are some fundamental changes happening within a low-priced stock, the share price may witness a huge run-up in a short span of time. But, if the sudden rise in stock price is operator driven, it could be a purely pump and dump story. Before you find what are good stocks to buy under $10, be very cautious before investing in penny stocks.
Also Read: US stock market weekly summary and a look ahead at key events this week
At times good quality stocks see a sharp correction in their prices and may be available at an affordable cost. If the inherent reasons for holding a stock haven’t changed, one may consider buying more of such stocks.
Source: Finviz
Note: Nasdaq stock exchange; Under $10 stocks; Sorted on market-cap; As of August 19, 2022
Disclaimer: The investing decision in these or any other stock should be taken on your own after carefully evaluating the business and other fundamentals of the company or after consulting one’s financial advisor. It is not a recommendation to buy, hold or sell any of the stocks. Financial Express Online does not bear any responsibility for investment decisions made by readers/investors.
