Penny stocks sell for pennies or, at least, for under $5 per share, and are the stocks that upcoming or new companies generally offer on the stock market. While penny stocks trade for small sums and in an unregulated and volatile market, you shouldn’t underestimate or fear them. By researching the companies with care, and by using the right trading techniques, it can be possible to get huge returns from penny stocks.
Here are some of the benefits of investing in and trading penny stocks:
Easy to Get Started
Image via Flickr by Katherine Ridgley
It is not necessary to have a large account to get started with penny stocks. As these stocks have low prices, it is possible to start trading with a small account and without investing a lot of money. You also don’t need to have any specific certification or degree to begin trading. Just get yourself a brokerage account and a laptop with an internet connection, and you are all set.
Good for Beginners
Compared to complicated, higher-priced stocks, it is inexpensive to invest in penny stocks. It is also easier to comprehend the basics of penny stock trading and learn about identifying and predicting their patterns in the stock market. So, if you are a complete newbie to stock trading, it is to your benefit to get started with penny stocks. As you don’t need to invest a large sum of money to begin with, you can afford to experiment and learn. You can start small, build up your knowledge base, and expand from there. Plus, you can use a penny screener to invest in the right penny stocks.
Plenty of Reward for Little Investment
Since upcoming or new companies offer penny stocks for under $5, you don’t need to make a huge investment to buy them. It is possible to buy plenty of penny stocks at low rates, and that can turn out to your advantage if the companies succeed. Then their stock will soar. And, if you were smart enough to buy a billion penny stocks, you will make a fortune.
While there is no guarantee that the penny stocks you buy will fetch enormous returns, there is always a potential for possible gains. And this levels the playing field between small-time investors and large-scale investors.
Good Way to Diversify Your Portfolio
Having a diverse stock portfolio is crucial for minimizing the investment risk factor. Plus, it may be possible to make a profit by short selling the penny stocks. As penny stocks are short term investments, they can help you to increase your liquidity.
While higher gains are possible, it is essential to remember that the penny stock market is unregulated. You can get fraudulent or overblown information about the stocks, so you should proceed with caution and research the companies to evaluate if they will be safe investments.
If you have a lot of risk tolerance and are disciplined about learning how the market works, you can derive plenty of benefits from trading penny stocks.