There are many people who would love to start trading penny stocks but hesitate to do so because of the perceived risks that are involved with it.
While it is true that there are many risks that come with trading penny stocks, it’s also true that there are many advantages that come with them as well, and those advantages are what we are going to talk about today.
Here are the top 5 reasons to invest in penny stocks:
1 – You Need Less Capital
One of the biggest appeals to trading penny stocks is the fact that they are priced very low (less than $5 or $1 a share), which means you need less capital to invest in. While $50 may seem like a very small and meaningless investment, if you choose a hypothetical stock priced at say just $0.5, you will have accumulated 100 shares of that stock, which isn’t bad. With an investment of $500, you will have gained a thousand shares of that same stock.
2 – It’s More Accessible
Since you need less money to invest in penny stocks, they are also much more accessible than their higher priced options. What this means is you can build a position in the penny stock market with a small amount of capital. That’s not something you can do with regular stocks.
3 – Your Potential ROI Is Higher
With penny stocks it is perfectly possible to get more than double on your initial investment and within a relatively short time frame. It’s not guaranteed of course, as you still need to be shrewd on your investments, but earning say $50,000 or so from an initial investment of around $5,000 is not at all unheard of.
4 – You Don’t Have To Dray Trade
There is no rule that says you have to day trade a penny stock in order to make money with it. Instead, you can always buy at a low price and then hold it for several months if not years. Some penny stocks can rise in value to the point that they are no longer penny stocks because their price will have eclipsed the $5 margin.
5 – Diversification Is Easy
Last but not least, it’s far easier to diversify with penny stocks in contrast to higher priced shares. If you’re willing to invest $1,000 for example, you could buy a sizable amount of shares from multiple companies priced at less than a dollar. The more companies you buy shares from, the larger your potential to make money even if it’s at only a 10-30% increase a share.
Investing In Penny Stocks
If you’re still extremely cautious or don’t feel good about investing in penny stocks, then maybe you should find something else to invest your money in. But by reading through this post, hopefully you have come to see that there are still many advantages penny stocks have over larger priced ones that could make it worth a shot.