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Penny Stocks to Buy for Long Term

The retail crowd's liking for penny stocks is understandable and more than justified. Penny stocks come in with higher risks, but they offer potentially higher rewards.

You must be willing to take the risk of investing in penny stocks if you want to make big profits in the market.

A clear line must be drawn when picking penny stocks because not every penny stock will turn out to be the next Bajaj Finance or Eicher Motors.

If you're looking for penny stocks to buy for the long term, apply the following fundamental filters.

  • Last 10-years sales and profit growth greater that 10%
  • Cash on the books greater than total debt
  • Current ratio greater than 1. Ideally greater than 2
  • Return on Equity greater than 12%

This step-by-step process will get you started in your hunt for the best penny stocks to buy for long term.

If you do this, who may even end up with a lot of multibagger penny stocks in your portfolio.

Check out Equitymaster's powerful stock screener where you'll find the list of multibagger penny stocks in India.

You can also checkout our playlist on Penny Stocks on Equitymaster's YouTube channel.


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Which are the top multibagger penny stocks in India right now?

As per Equitymaster's Stock Screener, here is a list of the top multibagger penny stocks in India right now...

These companies have been ranked as per the returns they have given shareholders in the last 3 years.

Remember, it's not easy to identify future multibagger stocks, but if you do it carefully and with due diligence, you can find high growth companies which can turn out to become future multibaggers.

How should you go about investing in penny stocks?

Penny stocks are usually issued by new or very small companies. These companies often don't have a proven track record, which is why their shares are sold for so little.

Larger, more established companies may also have stocks trading under Rs 100 when they are facing financial trouble or approaching bankruptcy.

Since they carry a high amount of risk, one must have a proper strategy in place.

Check out our framework for investing in penny stocks. This strategy is the easiest one to make money from penny stocks.

What are penny stocks?

Penny stocks are shares of listed companies priced below Rs 100. In the US market, these stocks trade for less than a dollar i.e. for pennies. Hence the name.

Penny stocks have the potential for above-average returns. However, they are extremely risky. Therefore, investing in them requires care and caution.

How long should we hold stocks?

The strategy behind long term investing is to hold on to stocks for a period of more than three years, or possibly more than five years.

Three years or five years sounds like a long period when one dives into the stock market. That's because most investors are looking to make a killing in the short term.

But that's the difference between a trader and an investor.

There are retail investors who choose to invest in fundamentally strong stocks and remain invested for the long haul. This can even mean a period of 3, 5, 10 or more years.