Key Facts of Investing for Capital Gain

Aims

A Penny Share is classed as one costing less than 100p in a company that is valued at less than £100 million (when we recommend it to you) and which has a bid-offer spread of 10% or more of the offer price.

The aim of your investment is to achieve a high percentage capital gain should the company’s fortune improve and the share price rise. While short-term growth is obviously preferred, investors should appreciate that there are no set time limits to the duration of investments in "Penny Shares".

Your Investment

"Penny Shares" can be bought and sold in exactly the same way as other shares, that is, the buyer pays and/or the seller receives the price quoted at the time of each transaction. An investor is free to buy and sell their shares at any time so long as market trading conditions allow. For a full scale of City Equities dealing charges please contact customer services on 0207 489 5555. Like all shares, the price of "Penny Shares" can go down as well as up, so an investor risks losing all of the money invested.

Risk factors

"Penny Shares" can be a very risky investment because:

  • the company whose shares are being sold may only recently have been set up
  • the company may have suffered financial difficulties in the past
  • it is unlikely that the company will pay a dividend
  • the shares can be very difficult to sell
  • the share price may be very volatile
  • there is a significantly wider percentage "Bid-Offer Spread" than in, say, FTSE-100 shares because of the risk involved
  • the "Spread" means that if you have to sell the shares immediately, it may mean doing so at a significant loss


Are penny shares a suitable investment for me?

What type of investor should consider purchasing "Penny Shares"?

"Penny Shares" pose a greater risk to an investor than those in larger companies and, as a result, no-one should consider trading in them unless:
  • they can afford and are prepared to lose all of the money they invest in "Penny Shares"
  • they have experience dealing in stocks and shares
  • they already have a share portfolio
  • they have less than 20% of their share portfolio invested in speculative shares
  • they own their own home
  • they have at least 3 months expenses on deposit in their bank or building society
  • they have made adequate provision for their retirement.

Who should NOT invest in "Penny Shares"?

"Penny Shares" are an unsuitable investment for a great many people. Under NO circumstances should the following people consider investing in "Penny Shares":
  • the unemployed
  • students (including business students)
  • those who cannot afford to lose any of their savings or capital
  • those who have no experience of investing in stocks and shares
  • those with no savings, "blue-chip" share portfolio or retirement provision
  • those with little or no assets
  • those who would have to borrow money to buy the shares



Risk Warning

There is an extra risk of losing money when shares are bought in some smaller companies including 'Penny Shares'. There is a big difference between the buying price and the selling price of these shares. If they have to be sold immediately, you may get back much less than you paid for them or you may have difficulty in selling them. Past performance is not a reliable indicator of future results. The price may change quickly and it may go down as well as up. You could lose every penny put into a particular share.

The information contained above has been compiled from documented sources which are believed to be reliable but, due to their very nature, are subject to a degree of historical inaccuracy and have not been independently verified and cannot be guaranteed. The pages on this website are provided for information only. City Equities Limited will not accept responsibility for loss incurred by any person or body acting, or refraining from acting, as a result of information and/or opinions given anywhere on this website. Issued by City Equities Limited, Aldermary House, 10-15 Queen Street, London, EC4N 1TY. Registered in England. Registered No. 2742847. Registered Address: Amwell House, 19 Amwell Street, Hoddeson, Herts. EN11 8TS. City Equities Limited is Authorised and regulated by the Financial Services Authority. Registration No. 155051.