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Why are Penny Stocks Attractive?

Jan 16, 2008
For penny stocks investors, the cost isnt all that matters when it comes to choosing what companies to invest with. Just because the shares are less than a dollar each doesnt mean the trader wants to choose penny stocks that are not sound companies.

One thing that a penny stock investor looks for when evaluating which companys stocks to trade in is how it is expected to perform in the marketplace. Knowing how investors react to this particular stock can be the difference in making hug gains or great losses. Unless you're interested in a monetary and emotional roller coaster ride then sound analysis is a must.

Financial forecast and growth are usually what most expectation are based on unless the company has some significant proprietary news. If news hits the market and a penny stocks value rises throughout the day, then it can be a strong projection that this penny stock is a worthwhile investment.

If a penny stock is growing in percentage slowly and gradually then this is usually a good sign that the stock has good potential to triple, quadruple, or do even better. However, if on the other hand you see a stock rise quickly as soon as the market opens then it may be wise to sit and wait until it drops again or risk becoming the victim or momentary excitement that will die soon there after.

Many times a penny stock will jump in value early on and wind up plummeting back down to its original value, if not lower than what it was on opening. This gives the wise investor the perfect opportunity to invest in this penny stock and save yourself the risk of losing your investment from hyped demand.

Though many people criticize penny stocks as gambling, many investors have a change of heart if they find a company that shows amazing promise and happens to offer penny stocks as their only trading capacity.

Penny stock investing gives you the opportunity to experience great profits using very little initial cash, which is another major factor in what makes them attractive to beginners, who may be timid at first, in the world of trading.

As unpredictable and risky as they can be, penny stocks are attractive because of the excitement and possibility that you could choose a company whose stocks result in major financial gains for you, increasing your confidence as an investor hoping to achieve financial success.

It is certainly more realistic than playing the lottery if done wisely, and millions of people habitually spend money on lottery tickets. With penny stocks, your odds are dramatically better, especially since you have control over where your money goes. You can study the factors that make a certain stock attractive and then decide based on those factors whether or not you want to take the risk. Also, you can learn from mistakes and make necessary adjustments to do better on future investments.
About the Author
Scott Johns conducts research and analysis of stock market picks for a penny stock analysis company. To check out Best Penny Stocks and Picks for some of his company's latest picks.
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