Penny Stock Trading – Four Reasons To Give It A Try!

| September 26, 2014 | 0 Comments

Four Reasons To Start Trading Penny Stocks 

Investing in penny stocks isn’t for everyone, but if you’re looking to make some serious money, it’s one of the quickest ways to profit! 

While mainstream stocks, mutual funds, and bonds are popular, (they’re the Kardashian girls of finance), have you ever considered the black sheep – penny stocks?  

What Are Penny Stocks? 

Penny stocks may be one of the most underappreciated and misunderstood forms of investing. To some, the name insinuates fractional gains and minimal reward.  

For others, it’s an unfamiliar and foreign concept that’s ignored. But what are penny stocks? 

The term “penny stocks” simply refers to low-priced, small-cap stocks.  Despite the name, penny stocks very rarely – if ever – cost a penny. Instead, any stock under $5 per share is widely considered a penny stock.  

While there are stocks on the NYSE and NASDAQ that trade for under $5, these don’t garner much attention. Instead, investors like to blaze their own trails away from the major exchanges and look at the OTC markets for ideas! 

Despite the difference in price and cap size, penny stocks operate quite similarly to standard stocks.  

You can purchase shares through a stockbroker or online with the click of a mouse. 

You can buy, sell, and trade as you please.  

The major difference between traditional stocks and penny stocks is traditional stocks don’t move much… and penny stocks jump around like a two-year old high on sugar! 

This is what makes penny stock trading so intriguing and rewarding. It’s not uncommon for a stock to jump from 35 cents to $5.00 in a matter of weeks… or days!  

The Advantages of Penny Stocks 

It would be foolish to say that investing in penny stocks comes without danger.  However, there are certainly a number of advantages to penny stock trading making it an attractive risk.  

Here are four reasons so many investors enjoy trading penny stocks: 

Don’t Need A Lot Of Money 

Most stock investments typically require large amounts of money to get started. For example, real estate investments require hefty down payments and often have ongoing monthly expenses. Many mutual funds ask for minimum contributions of $1,000 or $10,000 or more!   

And a startup business requires investors to contribute assets without expecting immediate returns (if ever).  

Even standard blue-chip stocks can trade for hundreds of dollars per share. While those investments may bring decent returns, it’s out of reach for the average person. 

Penny stocks, on the other hand, welcome investors with small and large portfolios alike. You can get started with minimal capital – meaning just a few dollars in some cases – and begin to let your money work for you. 

Huge Growth Potential 

If you ever spend time studying stocks from the major exchanges, you quickly realize that the growth potential for most is very low.  

Over a period of one, two, or five years, the average stock will see returns in the single digits… and sometimes double digits if you’re lucky.   

With penny stocks, this isn’t the case. Depending on your ability and a bit of luck, you could see double-digit returns in a matter of days or weeks.  

Remember most penny stocks are small companies in their “growth” phase – which affords you the chance to ride the growth train for all it’s worth! 

Increased liquidity. Technically speaking, standard stocks are liquid. You can buy and sell as often as you like. However, most brokers advise clients to take a long-term approach for best results. Penny stocks, on the other hand, aren’t usually meant to be long-term investments. Their volatility makes them perfect for quick trades and high returns. This can be a great way to offset your portfolio with some liquid investments. 

Opportunity for Uncovering a Gem 

Did you know that there are rooms full of analysts on Wall Street studying the big stocks of the day?  Consider Apple stock.  There are hundreds of analysts following the company and thousands of professional investors tracing the business and the stock. 

The odds of you finding a gem at Apple are exactly ZERO. 

However, for an unnamed, unloved, and not followed stock, the opportunity to uncover a mine of gems is huge!  If only a handful of people uncover something special about a stock, they can act quickly and gather a position – then when the rest of the world learns their secret… the big returns really fall in line.  

Real Life Penny Stock Successes are Possible! 

Finding penny stocks that skyrocket isn’t uncommon… look at these two… you might already know them! 

General Growth Properties                    

In February 2009, the real estate investment trust General Growth Properties was selling at $0.59 per share – as a result of the financial crisis. Five years later, it’s selling well above $20.00 per share. That’s a gain of more than 3,000%.

Pier 1 Imports 

The successful house-wares retail store, Pier 1 Imports, was once considered a penny stock.  It too hit a low in 2009 – to the tune of $0.11 a share. Those willing to invest during this time were rewarded with gains of 18,500%. It currently trades around $15.00. 

Become a Penny Stock Trader 

Investments come with both risks and rewards. For penny stock investors, the potential for high rewards far outweighs the risks. If you haven’t considered penny stocks in the past, now may be the time to jump in. Who knows, maybe you’ll discover the next real life success story. 

Profitably Yours, 

Penny Stock Research

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Category: Penny Stocks

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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