Penny stocks have a reputation that keeps many investors away, they are known as a volatile and unpredictable stock choice that can leave you high and dry. That being said penny stocks are cheap, to be considered penny stock they generally sell for well below $5 making them very attractive to newbie investors and those looking to make a quick buck. This also provides a level of excitement for young investors. They have their downsides but penny stocks also have huge potential that is unmatched in the investment world.

Double Your Money

One big advantage that penny stocks have over more traditional stocks like IBM or Whirlpool is that they are cheap enough to easily double in price. It is easy for a $1 stock to double and give a nice return to the investor, however when a stock is already at $700 there is a long way to go for doubling. In fact, it is this potential for quick returns on cheap investments that keep people coming back time and again. If you have any doubts about the popularity of these stocks do, a search on Google for the term Penny stocks and another search for blue chip, the difference in results is staggering. Penny stocks are searched for on a three to one basis at least.

Losses

No matter what you are investing in you have to be prepared for losses. Big stock, small cap and penny stocks all have the potential to lose money. The difference of course with penny stocks you do not have a lot of money on the chopping block unless you have heavily invested in the market that is. The point is that you can invest a little with these types of stock where to invest in traditional stocks requires huge sums of money; therefore, your losses are minimized. That being said you should know you could lose every dime you invested!

Gains

Penny stocks are not governed by the same rules as other stocks. What this means is it is harder to determine which stock is going up and down using standard stock picking tools. The prices of stock are driven by more arbitrary and this stock can go through the roof in a moment’s notice for no apparent reason. There are a good number of people who are using penny stocks as a quick avenue to lifestyles of the rich and famous, and they just might attain the dream. On the other hand, these stocks can drop to the bottom of the barrel and never recover as well.

Conclusion

If you are looking for an inexpensive way to play, the stock market penny stocks and even small caps are a good choice. Of course, you have to remember the risks involved with this type of trading and never invest more in cheap stocks than you can comfortably live without. You could become the next millionaire playing with these stocks or you could just make lunch money the potential is there for either eventuality.

Author Bio: I work to bring you the information you need to get in on the latest developments in penny stock picks. What also helps achieve this is when you follow a trusted penny stock newsletter which you can sign up to receive via email.

Category: Finances
Keywords: penny-stocks,penny-stock-newsletter,free-alerts,otcbb,penny-stock,picksheets