a different sort of mutual fund, Business - Cambrian House, Home of Crowdsourcing

Summary

Domain:: pennystockmutual
Members:: 1; View Original Idea

I think there is a way to buy penny stocks that make a profit and are low risk, and that is by making a new sort of mutual fund.
My idea is based on the fact that; Mutual funds are good at spreading out risk. But the more you spread out risk the less return you get. So when investing people have to balance out risk vs. profit.
I think it is a good idea to spread out risk, but I think you can get a better return than the average market increase.
So if it is good to spread out risk and penny stocks give you more of a return, why not have a penny stock mutual fund.
The key to this working is that their is a number of companies that will make a profit, their is a number of companies that will loose money, and some will break even. So if you want to make money the profit from the winners has to cover the looses from the losers.
So first you have to make sure that their will be some winners in a group. Than you have to see how much return those winners will get (be it a doubling or a 10x increase.) Than you have to count up how many companies you have to buy. And than see how much money you will spend on each company and if the increase in the winners is enough for a net win.
For example; if you have a dollar and their are four companies to bet on, and you know that their will be one winner, than you should only bet on the group if you know that the winner will have more than a 4x increase(enough to cover the the buy in cost).
So I think this strategy can work in penny stocks to beat the market average because each stock can have such high returns. So by accepting looses in some companies, you can spread out your risk, so you can bet on the winners that will give you a net profit, ie more money.

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