Almost anyone can now buy Penny Stocks, thanks to their cheap prices. But not fall in love with the stock unless it has been well-vetted and you plan to own it for a long time.
Don’t Hold On to Stocks Blindly
Many renowned investors have warned against blindly holding onto stocks. Peter Lynch said, “Never fall in love with a stock; always have an open mind”. ‘Oracle of Omaha’, Warren Buffet also concurs with this idea. He said, “Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”
This simply means that if your penny stock investment or trade doesn’t pan out, it is best to cut the losses. Instead of holding onto losing trades and ‘throwing good money after bad’, it is always ideal to choose another trade.
Before Falling in Love with Stocks, Understand the Reasons Why
Never fall in love with your stocks unless you have clear reasons to have confidence in the stock.
#1 Always choose to trade or invest in stocks that are fundamentally sound. This way, you will be in a position to hold them for a long time – be it months or years.
The tips for identifying fundamentally sound penny stocks are covered in our professional penny stock course.
#2 If the valuation criteria used by you for choosing the stock still holds true, you can continue to hold on to the stock. For example, if you chose a stock because of its low P/E ratio compared to the market, you can hold onto the stock if that P/E ratio is still well below the market. On the other hand, if the P/E is well above market, it may be time to sell. So, falling in love with such stocks may result in financial losses.
#3 Luck never holds, but having a disciplined approach, good judgment, independence of mind, good instinct, decisiveness, and self-knowledge will help you choose penny stock winners. There are also some top secret criteria used by expert traders for selecting penny stock winners. These include technical and fundamental analysis and access to certain exclusive resources. You can learn more about them from the professional penny stock course.
Love May Not Always Be Reciprocated – Immediately
As Tweedy Browne Co says, “The stocks we own don’t know we own them and therefore do not behave in ways that are always consistent with our near-term interests”
This simply means that even if you choose the stock after vetting and scrutiny, it may not give you great returns within the timeframe you envisioned, just because you fell in love with the stock. The markets may change in the blink of an eye – be it the latest political turmoil, unexpected scandal, lawsuits, or even due to extreme weather.
But the good news is, if the stock that you have chosen have rock-solid fundamentals, amazing management team, and checks all the criteria of penny stock winners (as explained in our professional penny stock course), sooner or later, it would give amazing returns. It is just a matter of holding on.
As Buffet says for such stocks – “Our favorite holding period is forever.”