Canadian Penny Stocks Blog » Risk Management

Should You Be Building A Portfolio Of Penny Stocks?

Canadian Penny Stocks — Tue, 20 Sep 2011 15:39:54 +0000

For most investors out there penny stocks are usually a long shot taking up a small percentage of their portfolios while there are others who are swinging for the fences and fully invested in the grandslam wealth creation approach. I’m not judging you on where you’re at; everyone has their own level of risk tolerance. But if you have any penny stocks at all, have you considered them as a portfolio?

The Portfolio Approach.
In a general investing sense you would be diversified, so why not do the same in penny stocks. It’s a great way to spread your risk across different industries, stages of companies, and timeframes.

All of the same rules for picking larger companies still apply to picking the smaller market cap ones too. There are a few more things to consider when you’re dealing with riskier decisions though, but a key investing tennet is diversification through portfolio building and as such it’s worth considering.

Need to learn more? Read about picking profitable penny stocks

Would You Avoid Penny Stocks In Uncertain Times

Canadian Penny Stocks — Mon, 12 Sep 2011 13:29:53 +0000

This past summer has shown that markets can be very very volatile. Is doesn’t bode well for the Efficient Market hypothesis. There are a lot of professionals out there trying to figure out what everything is worth given all the economic news coming out from all corners of the globe, but at the end of it all they seem to get it wrong and things fluctuate wildly. That causes stomach ulcers for them and you.

So let’s talk about risk.

There are different kinds of risk when investing in the stock market. Some you can control and some you cannot. Investing in penny stocks is certainly a risky thing to do. However, as we’ve seen, investing in the overall market (index fund) can be fraught with risk as well.

In general small cap stocks are much riskier than a stable growing market, but in uncertain times they could present opportunities for growth where larger cap stocks are stock following the trend. This isn’t going to be a generalization, however many penny stocks are poorly corelated with index performance. So the overall market risk isn’t at play as much in a smaller cap company than the bigger ones with significant weightings in index funds.

Don’t get me wrong though penny stocks are risky! Their risk however would be evaluated differently than large cap companies.

#1 risk you can control is yourself and your money. You are the only one who determines the exposure you have to the market and individual stocks so your due diligence is always required!

Technorati Tags: Investing, penny stocks, risk

10 Ways Not To Pick Stocks

Canadian Penny Stocks — Mon, 05 Sep 2011 16:48:54 +0000

10. You’ve seen the ad on BNN. You know the ones we’re talking about. Those canned 30 second spots that has a clip of a mine, and a brief interview with the CEO saying good things. While they might be true, it’s up to you to figure that out. Don’t invest only on what you see in a paid advertisement.

9. e-Mail newsletter. They promise that *this* stock is going to be huge and go through the roof. Sounds pretty awesome. You only need to get out before everyone else does. That is not a game worth playing my friends. Again, good for ideas, but don’t trust them in the least, ignore them completely if you must.

8. The biggest gainer/loser of the day. One day run up in a penny stock could be a good thing, or an anomaly and the same goes on the down days. It might be a good way to find stocks that are moving, but find out what is behind the move before you decide it’s worthy of your money.

7. The tip your co-worker gave you. If your co-worker were a great stock picker he probably wouldn’t be your co-worker, he’d be your rich former co-worker.

6. String three letters together. Probably a bit absurd, but hey people have done crazier things. Typing three letters and seeing what turns up is just playing Russian roulette. It might be fun the time you make money, but there are more bullets than blanks in this gun.

5. Online forums. There are a lot of trolls and pumpers out there. You’re playing right into their hand if you blindly follow them.

4. Pure play commodities follower. You hear gold is going through the roof (or falling flat) so you invest in a junior gold mining company but are confused when you don’t see it matching the returns that gold is making. That’s because there’s a lot more going on there than you think. Time to brush up on your analysis skills. Price of gold is only one factor and depending on the company might not even be the biggest driver of value.

3. Your friend’s company. Your friend works for a bio tech firm that is publicly traded AND they’re curing cancer! Sweet, except your friend’s view of the company is generally not that of an investor but of an employee, and at worse it’s insider trading which is something you should avoid. So avoid this way of picking a stock.

2. Volumes. Volumes of shares traded can be deceiving and there’s a lot more I could say on the subject of volumes, but needless to say there is a lot more underlying to volume activity that you’ll need to know besides how actively it is traded. Namely, answer the “why” question.

1. Because I said so. First off, I would never ever tell you to go an buy a stock. I share with you some of the stocks I’m watching and track their performance, and even if you like them, it’s never a recommendation to buy. You will need to do your due diligence always.

There are no shortcuts, but if you want to learn how I pick my stocks, I can show you.

There’s even a special offer until the end of September too (find out more).

Have You Checked Out Picking Profitable Penny Stocks Yet?

Canadian Penny Stocks — Thu, 02 Jun 2011 15:46:48 +0000

The Picking Profitable Penny Stocks course has been out for a little while now. Have you checked it out yet? Head to InvestingCoursesOnline.com right away if you haven’t and see what we’re going on about. It’s really tremendous value for money.

If you’re already on the road to penny stock success and you’re just checking out the Canadian Penny Stocks blog for some penny stock ideas, that’s great and we’re going to continue to build on the successes of the past and keep bringing the free goods here.

But if you want more, check out the course. It covers a lot more material in detail than this blog. The course covers things like:
- When to sell profit, when to sell losses
- Researching Management
- Researching Cycles
- Managing Your Profits and Losses
- How to handle penny stock promoters
- Are penny stock newsletters worth it?
- Understanding volumes in Penny stocks
- When to use limit orders and market orders
- How I find penny stocks

The material is what you need for learning more about investing in penny stocks. The community you’ll join will further your successes and finally, the launch price really can’t be beat.

If you haven’t already, take a minute and CLICK HERE to check it out.

Technorati Tags: canadian penny stocks, Investing

Letâ€™s Talk Disclosure

Canadian Penny Stocks — Fri, 21 Jan 2011 01:35:57 +0000

If youâ€™ve spent some quality time watching BNN like I have you will often notice that the advisors that they often have on their programs will disclose whether or not they own the investments that theyâ€™re talking about. This is an important thing to consider and is even more important when you look at penny stocks.

source: wheat_in_your_hair

Conflicting Interests
When you listen to any analyst you have to keep in mind that they have their best interest in mind. If they are long a stock and get in front of a few hundred thousand people and tell them all itâ€™s great and everyone should go out and buy stock for themselves and their grandmothers then there could be enough groundswell to move the stock higher. Therefore they have just actively participated in moving a stock higher because of their own self-interest. This is a red-flag.

Disclosure in Penny Stocks
Disclosure becomes more important in penny stocks because of the nature of the price and the volumes traded. Some small cap stocks trade in very small volumes and therefore can have a big difference in the bid/ask spread. So if someone talks about how great a particular penny stock is, then they may have the opportunity to influence the price much easier than a multi-billion dollar market cap stock.
Penny stock newsletters will have a disclosure statement on the bottom of their emails that will outright say that they are getting paid to profile these companies and suggest to the reader that the price is moving higher.

What Makes the Canadian Penny Stocks Blog Different?
The Canadian Penny Stocks blog doesnâ€™t accept payment from any company to feature them on the website. All of the companies appear as a result of interest in the company as a result of fundamental or technical analysis. The blog will always try to disclose ownership positions in shares but it does become tricky in a blog format, since some stocks will be traded in and out of positions and the post remains on the blog.
There is a disclaimer on this blog that indicates that the information provided is not meant to be advice, nor a recommendation to buy or sell a stock. You should always be diligent with your sources of information. I hope that you can find the blog as a useful source of information to begin or further your research in to stocks and investing.

This blog will from time to time post information on products that have been personally vouched for and the site may be paid for the referral to those products. For example I could not have been able to perform a review of the Questrade platform without being a member myself. I continue to be a happy member, however may be compensated in a small way if you sign-up and become another happy member like me.

Itâ€™s unfortunate that penny stocks can get a bad rap, because if you have the stomach for high risk investing, there is some great money to be made discovering great small companies with great ideas and potential. The Canadian Penny Stocks blog will continue to strive to avoid the hype of penny stock promotion and provide some ideas and disclosure.

Technorati Tags: canadian penny stocks, penny stocks, risk

What Does Dollar Parity Mean For Penny Stocks

Canadian Penny Stocks — Fri, 07 Jan 2011 03:12:08 +0000

The Canadian dollar is currently trading at or around parity to the US dollar. This is great for those interested in some outlet mall shopping south of the border, but what does it mean for you the penny stock investor? The answer, like always in investing is, â€œit depends.â€ That is the case in a couple of ways.

Trade

What parity boils down to for all of the Canadian penny stocks is trade. In many cases companies are either manufacturing goods in Canada and exporting them out of the country or mining them outside the country and selling them in Canada (or exporting again).

For companies that are solely focus on manufacturing and selling within Canada the impact will certainly be lessened. These companies will be affected by overall macroeconomic trends and the impacts parity creates therein, however they wonâ€™t be as immediately impacted as other companies. In fact, if these companies are sourcing their raw goods from a country that is pegged to the US currency then they might be in a good position to be winners in dollar parity.

The companies that are usually more common at penny stock levels are ones that are mineral exploration companies or research based companies. The exploration based companies can benefit from the fact that their funds that have been raised through public offerings of stock can go further towards the big find, however producer who may be exporting to the US.

Itâ€™s certainly a buyer beware and taking parity into consideration as part of your due diligence is worth considering, especially in todayâ€™s fragile recovering economy. Any misstep and the parity could swing even further in Canadaâ€™s favour. If you know the right stocks that will benefit from this you may be in a good position to profit.

Technorati Tags: canadian dollar, canadian penny stocks, Investing

What Do You Do On A Down Market Day?

Canadian Penny Stocks — Wed, 17 Nov 2010 01:23:41 +0000

There are always going to be down days on the stock market. The reality is that with every up thereâ€™s a down lurking somewhere around the corner. Today was one of those days with the TSX and Dow dropping well over 100 points each. Is it time to pack it in, sell everything and head for the cash under the mattress approach? Clearly the answer is no, but sometimes itâ€™s good to take a look at what youâ€™re feeling (or doing) on days when the markets are going down.

The media loves a bad news story and many people are concerned about Ireland and what theyâ€™re going to do to sustain their economy and the ripple effect that will have with Portugal, Spain, and more Greece worries. Are we heading toward another double-dip? How does China play into all of this? The headlines are everywhere and every day we see one more reason to leave the stock market and when we see the news compounded with the big drops in the stock indexes we can be swayed to think that we need to jump out of this sinking ship.

The reality is much different. How many times have you exited from a losing position only to have it turn around days or even hours after you sold it? This can happen all too often to investors who are not convicted by their investing philosophy and goals. Are you convicted? The perfect time to tell whether or not this is the case is on a down day on the stock market where you see all the negative press and the gloomy numbers to support it.

When you feel like selling or just plain quitting, ask yourself if itâ€™s your selling because you have reached your target, or your core investing thesis has changed. The reality in most cases is that neither have happened and youâ€™re letting your emotions get the best of you.

The number one enemy of the investor is themselves. By taking your emotions out of play and checking your reality on days where youâ€™re scared will help you take your investing to the next level of success.

Technorati Tags: Investing, investing basics, stock market

Canadian Penny Stocks Positions

Canadian Penny Stocks — Wed, 16 Jun 2010 02:11:55 +0000

Just a quick update after a very profitable day of stock market trading. I’m hoping to see another strong day of profitability, however don’t expect that trend to continue through the end of the week. Several of my trades are close to making their targets and I’ll be taking some of the money off of the table on some of them.

Unfortunately one of my picks of the year this year was Great Western Minerals Group hasn’t been performing. I still am planning on holding on to this company for the longer term, but it’s unfortunate that it hasn’t been a big winner.

The lesson from above is that you need to have an exit point for both taking profits and cutting losses on all of your positions. Several penny stocks I’ve invested in were clearly trades from the outset and specific targets and those are close to being met. GWG.V is one that I’ve always been interested in holding for a longer term, so I’ve widened the profit/loss gap on this one.

Technorati Tags: canadian penny stocks, cutting losses, taking profits, trading rules

Can You Really Make Money With Penny Stocks

Canadian Penny Stocks — Sun, 23 May 2010 21:56:04 +0000

It’s a question worth asking yourself every now and then. Can you really make money with penny stocks? This type of stock is often associated with junk status and rife with scammers and never an opportunity to make an honest dollar. This blog really doesn’t subscribe to the scammer mentality and believes that there are occasionally small caps stocks out there that really do have potential and honest profits.

By investing capital in small companies you are helping companies with real people make a real living. You are participating in the free market that we are very fortunate to be able to be involved in. By taking some time to really learn about the companies you choose to invest in, you will know that they are making steps towards success.

Not all companies in the sub $5.00 stock price range will be able to become large corporations nor do all of them desire to. It’s OK there are still lots of stocks that will allow you to make oodles of profit under the $5 stock price range.

Be prepared for losses while investing in penny stocks. It’s true that there will be losses, but it’s important to have you’re plan in place and research done. If you truly do your homework on a stock you will come to realized whether or not a stock is a scam or really worthwhile. The people out to scam you are mostly people that are hoping that you buy without due diligence. It works for them in spades too. Don’t let yourself be a part of that.

So to answer the question. YES you really can make money with penny stocks. They are clearly a high-risk way to invest money, but for those who have the time to perform some stock market research it does have the potential to return real money.

Happy Trading

Technorati Tags: canadian penny stocks, penny stocks, small cap

Book Review: Rework

Canadian Penny Stocks — Mon, 12 Apr 2010 21:20:37 +0000

The Canadian Penny Stocks blog has been on a bit of vacation because the author is on a bit of a vacation. A big one in fact. The great thing about investing is that if the stocks you follow are for the long term then a couple of weeks off won’t impact the long term impact of your portfolio at all. As long as you keep the occasional tab on the markets and news releases from your company then you’re golden. This is very possible through the magic of the internet.

A Recommended Read
Having had the chance to read a few books over the vacation so far, I’ve got one to recommend. It’s called Rework and it’s by the guys at 37signals. This book is by no means an investing book but it is still relevant to anyone who reads this blog. Why you ask? It gets back to the basics of entrepreneurship which is really the spirit that drives independent investors.

Meetings are toxic
One of my favorite sections of the book was about meetings and put simply: meetings are toxic. So you should be avoiding them at all costs. Next time you’re in a meeting, look at the people around you, add up what their collective hourly wage would be and see how much money is being spent on the meeting. Staggering really.

Back To Investing
Although there’s nothing specifally mentioned about investing. Penny stock investors are looking at small companies. This books focuses on people operating in small businesses. It really might be worth considering some of the subjects covered in this book then look at the management of the company you’re thinking of investing in. If you see that management is looking to actually contribute to the success of the company, not just his bottom line then you might just have yourself a winner.

Should You Read It?
Absolutely. The book should really serve as a discussion point for why you do what you do at any workplace, not just if you own your own company or are investing in an up and coming company. Get out there and check it out.

Technorati Tags: book review, review, rework