Why Penny Stocks?
9:53 AM Posted by MH
People asking why I mostly play penny stocks. Here is why.Penny stocks are shares that trade from a fraction of a penny to $5.
The upside of penny stocks is the ability to turn a small investment into a fortune.
The downside is the risk, volatility of the shares, and the lack of corporate transparency.
For example, if we traded one of your garden variety fortune 500 stocks, how much return potential can you expect to see? Not a whole lot. These are the kind of stocks that people like to make a steady 10-15% return on a yearly basis. This is nothing to sneeze at. But I wouldn't expect to get rich from it.
Lets say you had $4,000 and you invest in a $40 a stock this means you have 100 shares. With that 10% increase that would mean that the stock price at the end of the year is $44. Not bad, but not exactly earth-shattering.
With this same example, lets say you invested that $4000 in a penny stock that was worth 50 cents a share. You'll end up 8000 shares.
Now with penny stocks, the growth potential is really infinite because it really doesn't take that much to move the price. Some have gone up as much as 500% in a single day. Let's just say from the previous example that the penny stock went up 400%(AGEN), that would mean the price when from 60 cents to 3 dollasr a share. You can really start to see how such small movements can provide big profits.
Source
The upside of penny stocks is the ability to turn a small investment into a fortune.
The downside is the risk, volatility of the shares, and the lack of corporate transparency.
For example, if we traded one of your garden variety fortune 500 stocks, how much return potential can you expect to see? Not a whole lot. These are the kind of stocks that people like to make a steady 10-15% return on a yearly basis. This is nothing to sneeze at. But I wouldn't expect to get rich from it.
Lets say you had $4,000 and you invest in a $40 a stock this means you have 100 shares. With that 10% increase that would mean that the stock price at the end of the year is $44. Not bad, but not exactly earth-shattering.
With this same example, lets say you invested that $4000 in a penny stock that was worth 50 cents a share. You'll end up 8000 shares.
Now with penny stocks, the growth potential is really infinite because it really doesn't take that much to move the price. Some have gone up as much as 500% in a single day. Let's just say from the previous example that the penny stock went up 400%(AGEN), that would mean the price when from 60 cents to 3 dollasr a share. You can really start to see how such small movements can provide big profits.
Source
http://ezinearticles.com/?expert=Chris_Braff
