Investing in penny stocks is like driving on Nigerian roads. Forget the theory taught by the driving schools. The rules are simple. Do not get bashed. Do not bash. If you’re among the majority of Nigerians, avoid VIO, FRSC and every other law enforcement agency like a person having conjunctivitis. Except you drive a G-Wagon or something equally threatening. Your portfolio could appreciate faster than the rate at which potholes appear.
The same portfolio could depreciate faster than danfo drivers change lanes. Hence the following rules are key.
Volume is key
Especially for investors who rely on dividend payments for the per second hussling required to live well in Nigeria. It makes no sense having just a thousand shares in a penny stock. Cornerstone insurance recently paid a dividend of 2 kobo per share. On a holding of ten thousand units, that adds 200 naira to your pocket. That cant buy a plate of catfish pepper soup. Why they pay such miserable dividends is a topic for another day.
Long term holding is advised
Some of the penny stocks around are often illiquid. I had to engage in fasting and prayers to get a buyer for a stock I wanted to exit. The stock ? Ask my pastor who’s name I wont mention. With a profit of over 50% for those who bought Vono products at less than one Naira, the stock has been on net offer for most of the week. Like a well-trained assassin do your due diligence before you shoot. You or your portfolio may not live to tell the story.