Penny stocks are often considered the riskiest stock market investment of them all. However, people do see a future in them, or as Germans say “pennystocks mit zukunft“, so there is a potential with them. These low-priced stocks are usually not listed in prominent stock exchanges, even though some could be found on NASDAQ and NYSE. Most of them are sold on AMEX or OTC exchanges. The good thing about these stocks is that they don’t demand a high initial investment. While one stock of a blue-chip company could be close to $1,000, you could buy hundreds and even thousands of penny stocks for the same amount. The volatility of these stocks is also high, which means that you can easily take a short-term advance from Heart Loans.
How do penny stocks make money for investors?
Let’s assume that the stocks of a newly started technology company cost $0.50 per stock and you have $1000 to spend. You buy 2000 shares of this company. As these low-priced stocks are known to have very aggressive price swings, it is highly likely that the prices go all the way up to $0.60 by the end of the day. The stock is now valued at $1200. This means that you have earned $200 within 24 hours.
This is how penny stocks usually work. The swing could also have made the prices drop to $.40 because of which your investment would be worth $800 only. However, this is a high risk, high reward situation. There are several investors who buy thousands of these cheap stocks and wait until the time is right. An ordinary stock will fetch you no more than 2 to 5% returns. However, penny stocks can provide 20% returns with ease.
You could choose to withdraw $200 and reinvest the initial $1000 in another stock to earn good returns. With just a handful of investments, you will be likely to get back your initial investment with an enviable profit figure as well.
Do people become millionaires with penny stocks?
Of course, they do. There are hundreds of people who have invested in these low-priced stocks and earned more than they would ever have doing a regular 9 to 5 job. These people have invested religiously in the stock market, picking up valuable stocks and then gaining stupendous returns on their investments.
Should you try investing in penny stocks?
Of course, you should. The principles of investment remain the same, whether you are buying a blue-chip stock or a sub-$1 share. If a company has potential, a good management team and a zeal to make it big in their respective industry, there is no reason it won’t be profitable and bring you a good ROI. It is true that this sector is filled with shady companies and dead stocks along with the notorious pump and dump schemes. However, if you employ due diligence, research properly and understand the risks of these investments, it will be easy to earn money.
Do you think you will be able to trade in these securities? Does the idea of volume trading look good to you? If yes, then invest in penny stocks and get ready for mind blowing returns.