Can You Really Make Money with Penny Stocks
Many of us have probably heard of someone that has invested in a penny stock and doubled their money or about someone who made loads of money by investing in an undiscovered company that turned into the next big thing.
What attracts people to invest in penny stocks is the notion that an investment can multiply many times over in a short-period of time.
For example a small investment of $500 in a penny stock trading for 10 cents can multiply many times over, compared to a slow-moving large-cap stock.
Most investors think that large cap companies are the only way to invest. But, the returns on many of these larger cap stocks can be very poor. However, if you put a small percentage of your capital towards penny stocks, I believe the reward outweighs the risk.
Investing in penny stocks offers you the chance to double, triple, quadruple your money. If a stock is at 10 cents and rises by ten cents, you will have made a 100% return.
Penny stock investing offers you the chance to invest in stocks that could be the next big thing and where shareholders can profit greatly. There has been a variety of examples of companies that have traded as a penny stock such as Pier 1 Imports (NYSE: PIR) and Monster Beverage (NASDAQ: MNST) which once traded at penny stock levels.
Although, it may be rare finding a company that may turn out as huge as Monster Beverage did, however there are a number of penny stocks out there that have the potential to grow from a micro-cap to a medium-cap company and offer its shareholders to profit nicely.
In theory, it may seem to be easy, simply just invest in a couple of penny stocks, then sell when it moves up. Sure, penny stock investing offers you the chance to double your money or more, but people tend to see only the upside of penny stock investing, while forgetting about the downside.
Unfortunately, penny stock investing isn’t that easy. Many inexperienced investor lose money. A 10 cent stock can just as easily go down by 5 cents and lose half its value or more, and may never get back to that level again.
The point is, whenever investing in Penny stocks, make sure you do extensive research and understand what you are getting into. And if you are trading penny stocks you should always put in a tight stop loss.
I believe that with the proper amount of research, attention to detail and discipline, it is possible to eliminate some of that risk and enjoy the superior growth that many of these micro cap companies can provide.
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