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Benefits of Investing in a Penny Stock

Jan 19, 2008
There are many benefits to investing in penny stocks. That statement is in stark contrast to many statements made by many so called investment authorities. That would have you think that penny stocks are something to be feared and avoided. Im here to dispel some myths and highlight the benefits while being honest about the risks.

Like I said before there are many befits to penny stocks but I will highlight just few here. These benefits include low share prices, potential for high gains, and providing great opportunities for small investors. Well start off by talking a little more about the share prices.

Penny stocks of course get their name because they are worth pennies on the dollar. The share prices can sometimes seems quite crazy. For example, a stock trading for $.0001 might seem silly to you. How in the world can a stock be trading that low and can it possibly go any lower? The answer to the latter is yes it can go lower believe it or not. However here is where one of the benefits come into play. You, the small time investor presumably, can buy a billion shares of a stock with those kind of share prices. Well if you have that many shares and the stock goes up in value even a little then WOW!

Well you can already see the potential for gains right. Its not uncommon for a penny stock to go up 50% or even 100% or more in a trading day. Its difficult to find these kinds of gains in typical stocks no matter what the industry is. Even if there were experience high gains you could not buy very many shares to benefit from the profits. Not only that but were talking about gains within a matter of hours instead of days or months. Thats a lot more exciting if thats what drives you.

Small time investors can find the stock market frustrating and even become envious of the investors with large amounts funds to invest. It is true that those with money make more money but you too can level the playing field with the right strategy. Penny stocks are risky but they do provide one of the few opportunities for small investors to great increase their current monetary situation.

In conclusion, yes all those consequences that people love to quote about penny stock investing can be true but obviously there are enough people investing in penny stocks for a reason otherwise they would not feel so compelled to warn people. So be aware of the consequences of unwise investing in penny stocks but also be aware of the great benefits if done correctly.
About the Author
Scott Johns conducts research and analysis of stock market picks for a penny stock analysis company. To check out Investing and Picks for some of his company's latest picks.
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