Penny Stock Investment

Penny Stock investment is an investment strategy based on strategic purchase of low price stocks with high growth potential. The investment objective is to hold the investment in the long-term (3 - 5 years or more) in order to capitalize on price appreciation and dividend yield in future. In the context of the Nigeria market, penny stocks are stocks trading between 50kobo and N5.00.

Benefit of Penny Stock investment includes relatively cheaper acquisition cost, opportunity to buy large volumes of stocks and investment in a stock with upside growth potential. It is a very good investment strategy for youthful/beginner/small scale investors; however Penny Stock investors must base their stock picks on sound judgment/fundamental analysis (which is often times scarce as most research firms do not cover penny stocks in their analysis) in a bit to mitigate against inherent risks.

A major demerit of penny stock investment is the effect of inflation on invested capital as a spike in inflationary trend may adversely impact the invested capital if there is no commensurate appreciation in stock price and/or dividend yield.