Penny Stocks Make Large Gains
Penny stocks may sound like a small-time investment, but they actually can yield very big profits.
Each year, millions of investors worldwide buy penny stocks because they are both affordable and potentially profitable. You don’t need a lot of capital to invest in penny stocks. But if you know what to look for, you can turn a small investment into a big windfall.
Risks of Investing Too Much
For the beginner investor, penny stocks are a lucrative investment because they tend to be more volatile than more conventional stocks. That makes them an excellent way to learn the ins and outs of stock trading without risking too much of your own money.
Conservative investors can afford to put their life savings into something like IBM, AT&T, or another of the stable yet boring “blue chip” stocks and let it sit there for years or even decades.
But penny stock investors often are attracted to the dynamics of the marketplace. They like to see their investments skyrocket quickly. Or they take their minimal losses, learn valuable lessons, and still have enough to try again another day.
When you invest in penny stocks, you can earn bigger returns faster. For many investors, that’s a more appealing scenario than investing, say, $500, in the stock of a big, established company. Within a few years, you may realize a 10% or 15% return on your investment – if you are lucky.
But how much have you actually gained: $50 or $75? Meanwhile, your capital was tied up for years in a stock that was lethargic at best.
Penny stocks are often a better option, especially if $500 is your entire investment capital, because through shrewd trading and applying the lessons you learn along the way, it’s often possible to double, triple or even exponentially increase your buy-in in weeks or months, not years or decades.
Fear of Penny Stocks
Yet many people tend to shy away from penny stocks out of fear of losing all of their money. Like any financial investment, there is risk involved with penny stocks. But if you are careful to minimize your exposure and never invest more than you can afford to lose, the odds are in your favor.
Penny stocks are valued lower than blue chips, Dow Jones Industrials, or other more established stocks usually because the companies they represent are new and unproven. But that doesn’t mean that they don’t have the potential to grow – and grow quickly!
Remember, at one time or another, practically every stock being traded on the exchanges today was a penny stock, or at least a new company that had yet to prove its value.
Most investors fantasize about being able to go back in time and invest in Apple or Microsoft in the 1980s, or IBM in the 1940s, and realize 1,000% returns or higher on their investments.
When you invest in penny stocks, you don’t need a time machine to accomplish this task. You can actually do it right now, in real time, and still have time to enjoy your fortune.
Picking Penny Stocks
If you are able to overcome your natural phobia of penny stocks, you can increase your chances of making huge returns on your investment if you limit the penny stocks you invest in to a series of critical criteria, including companies that have:
- A strong management team
- A track record of revenue gains over time
- Accelerating earnings increases
- High barriers to entry within their industry
- Approaching profitability or are already profitable
- Low or zero debt load
- Patents, technologies or intellectual property rights that give them a competitive advantage within their industry
- Are in a growing industry or new market
- Have superior branding, positioning and marketing than their competitors
While this is quite a wish list, there are many penny stock companies that check off all these boxes. All the smart investor has to do is go out there and find them.
When You Shouldn’t Invest in Penny Stocks
Penny stocks aren’t for everybody. For example, they aren’t for the faint of heart.
While the opportunity to discover an up and coming company that is poised to take off is substantially higher in penny stocks, there are also a lot more marginal companies to wade through. You have to kiss a lot of frogs before you find a prince.
Succeeding in trading penny stocks requires patience, experience, and a personal investment strategy. It’s also important that investors know how to limit their exposure and time the markets right.
Yet if they are able to follow these simple guidelines and are diligent about researching and identifying only those penny stock companies that are poised to blow up, there’s a huge potential upside to trading penny stocks.
And the biggest benefit of all is that anybody can get in the market, regardless of their investment capital.
Author Bio – This article is written by Penny Stock Prodigy on behalf of www.pennystockprodigy.com, a well-established website for all the information pertaining to investing in Penny Stocks.
This article is only based on personal experience and an opinion of penny stock prodigy this is not investment advice. Disclaimer