Should you get into penny stock trading?
As an entrepreneur, you might have some extra money on the side, and wondering how to put it to good use. Here’s an idea – the stock market! Stocks have always been one of the best ways to make your savings grow and reach your financial goals over time. It’s a great option for being better prepared for the future, and a penny sstock is worth considering.
But you still need to determine how you’re going to invest…
There are different kinds of trading styles and markets you can take advantage of. We’re going to speak in this article about an increasingly popular type of stock among retail investors – penny stocks. For more details about how to integrate these stocks into your trading strategy in the best possible way, have a look at this guide “penny stock trading explained“.
What are penny stocks?
Penny stocks are usually very small caps, as their share price is worth less than £1 in the UK and less than $5 in the US. These cheap stocks are often new companies and start-ups in trendy industries, like the cryptocurrency, biotech, cannabis, and sustainable energy sectors, sectors that might become tomorrow’s big successes.
Most penny stocks are traded over-the-counter on unregulated markets, which makes it difficult to find reliable information about them and their growth prospects. These companies do not really comply with disclosure and sharing information, nor auditing standards like listed companies on the London Stock Exchange and other big exchanges, such as the Nasdaq. This lack of information and transparency is one of the major risks when trading penny stocks.
Still, there are some penny stocks that are traded on exchanges, which provide all information you can use to decide if they are good investment opportunities. Moreover, you can easily find them on broker trading platforms.
So, should you get into penny stock trading?
Penny stocks are risky assets to trade or invest in. As we explained previously, it might sometimes be difficult to find reliable public information about these companies. Penny shares are also very volatile and traded with low trading volume. Moreover, penny stocks represent relatively new companies that have no proven track record and might never succeed.
Still, there are advantages to consider when thinking about getting into penny stock trading.
First, it is a good option for those who do not have a large amount of money to invest, as their stock price is very low, particularly compared to giants like Google.
Also, the volatility associated with these stocks can provide great returns if you know how to take advantage while still protecting your capital. It all depends on your trading profile and your risk tolerance.
Finally, if you do your research and choose the right companies, you might be able to make good money, as many large companies were once penny stocks – consider companies such as Ford Motor Company, Xerox, Monster Beverage Corp., Amazon, and Blackberry! In addition, there are many different kinds of penny stocks you can choose from, as you can find penny stocks in many different sectors.