subject: Penny Stocks - Are These Worth Adding To Your Investment Portfolio [print this page] Penny stocks are shares that can be traded starting at any amount that is less than $5. If a company's total value or market capitalization is less than $10 million, it may be called a penny stock company. This article discusses whether penny stocks are worth adding to your investment portfolio.
They are usually riskier than average investments and if your portfolio and your investment strategy is risk aversion, you do not need to include these stocks in your portfolio. Because they are much riskier than other investments, the reward potential is significant.
Some of these stocks have gone from $.25 cents to $30.00 while there are other penny stocks have become worthless. If you are in your twenties or thirties and have a longer time before retirement, you can probably stomach more risk and implement an aggressive investment strategy and try your hand at investing in these stocks, compared to someone with less time until retirement who may be advised to make conservative investment choices.
A lot of investors like these investments because of the small cost related to trading in these investments. It is hard to invest in Walmart or Microsoft currently and make a significant profit. If you purchased Walmart stock in the seventies that you still hold, then your investment return currently is extremely significant.
There are plenty of small companies across the US that have the potential for significant growth in the future or that can crash and burn. You have the ability to turn a small investment into a fortune when you invest in these companies that significantly grow in the future. The downside is that you will lose your entire investment if the business does not succeed.
It is important to keep in mind when considering penny stocks investing that all the major companies such as Walmart, Xerox, etc, used to be penny stocks at one point that investors took a chance on and benefited. As they grew, the stock price increased until the stockholders became multi-millionaires.
Additional Risks Involved
1. Do not purchase any stocks that you heard about for free. Swindlers usually use pump and dump techniques to scam you out of money. They will tout a certain stock with no supporting basis besides their word and once enough investors purchase the stock and inflate the price, they will usually disappear during the night after selling their stock at grossly inflated prices.
2. If investors do not do their own research or how to trade in these stocks.
3. Penny stocks may have low visibility and may not be easily traded.
If you take the time to perform proper research on the companies and learn how to trade in penny stocks, it will pay off in your investment portfolio for years to come because trading in penny stocks is a very rewarding and exciting investment opportunity.
If you take the time to learn how to find good companies that are offering these stocks and take the time to understand the dangers and the ways to avoid them, you can be one of the next multimillionaires. The recession makes this an opportune time to make a change and look for viable opportunities for success. There shall not be an opportunity like this for many years so you need to take advantage.
