As an investment advisor, my simple advice is to avoid penny stocks. The past six months have been volatile and small caps in particular (most are penny stocks) have been under pressure due to various factors.
Many small caps are not managed well, may have shady reputations and tracking them for real underlying business performance is tough.
So what other options do you have:
- Invest in equity mutual funds that give you the same exposure with a professional manager. Go for large cap, multicap, midcap or small cap based on your risk appetite. Get a free scientific risk profile done here.
- Invest in an index like Nifty Junior which mirrors mid/small cap funds. This may not give returns like some of the good mutual funds, but it is still better than taking risk in individual penny stocks.
The only exception to the above advice is if you know the company very well and are confident about their growth prospects.
