One of the worst things that can happen when you invest in any company is that you could buy in at a peak and the stock will soon realize a trough. It's not uncommon as we often all watch a stock rise and rise and then buy in just as the temperature on this stock begins cooling. After all, no stock can continue its rise forever. Still, just because a stock is rising doesn't mean that's any reason to not put your money to work when you have it. If this rise to crescendo happens to be when you have bought your stock, consider doubling down. Doubling down is of particular interest for this discussion with penny stock investing; but doubling down works for all types of investing.
What is doubling down? Some cynics call doubling down, "throwing good money after bad." This is because you are basically chasing a position which has lost a significant percentage of its initial value in the hopes that your decision to do this will be validated in the stock prices eventual rise. At least to some kind of a breakeven point.
For example; say you buy in at EFG penny stock when it is trading at $.02. Say you buy 100,000 shares; this would mean that your initial investment is $2000. Now imagine if these same shares went down to $.004. Ouch! That means that these same 100,000 shares are now worth $400.
While the first instinct may be to cut and run, this is not a very profitable way to live; especially if you believe in the product or the company and its future. Instead of running scared you may wish to chart the trades of this stock and once you're confident this trade has reached a bottom, you can buy more and double down your investment.
If this trade has reached its bottom point at $.004, investing another 100,000 shares means that your aggregate investment is $2400; that means that the share price only needs to reach $.012 for you to breakeven. If you can stomach another 200,000 shares at the $.004 share price, then your breakeven point is only $.0093. On and on down the line it goes.
Double down investing really works best for people who have the most time to keep their money active in the markets and reach their goals. What with the recent retracement in blue chip companies, this has presented the buying opportunity of lifetime for many investors. Still, not all of us have that kind of capital to risk; this is why penny stock investing can be a real help for small time investors. While penny stock investing isn't for everyone, the fact is that if you do you research and can tolerate the wild swings, doubling down can help you to strengthen your position, achieve the strike price you've been looking for and at least help you gain back any capital you've lost.
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