Trading penny stocks can be easy and quick task for the ones who have been into business for a long time, and for the ones who have an experience of the field. But when it comes to the beginners, it might be risky game and therefore it is always suggested to pick the stock list carefully. Investing in penny shares has a lot of benefits over other stocks, but at the same time it has its own cons too. Risk and rewards, with any stock, always go hand in hand, but no more so than the world of the volatile tiny stock market. When choosing which stocks to go with, keep these pros and cons in mind so that you can make the right investment call.
The Pros:
Potential: Penny shares have a lot in them. Companies like Microsoft, were once a very small stock. Companies that are starting with a base value begin as tiny stocks more often than not, and those that have an exciting new technology or product will quickly rise. If you're looking for a way to rise with the giants, then penny stocks do have the potential to do so.
The Pros:
Potential: Penny shares have a lot in them. Companies like Microsoft, were once a very small stock. Companies that are starting with a base value begin as tiny stocks more often than not, and those that have an exciting new technology or product will quickly rise. If you're looking for a way to rise with the giants, then penny stocks do have the potential to do so.
Better Rewards: Penny shares also have the potential to provide better rewards compared to the risks involved. While traditionally traded stocks offer a great deal of incentive, such as security and experience of the market, penny shares can often mean a softer "hit" if the stock doesn't perform up to your expectations. On the other hand, if you've invested in a company that has $14 per share, and then that drops to $4, you're likely to lose tens to hundreds of thousands of dollars. Some investors lose millions. It isn't likely to happen with small stocks, as long as you invest wisely.
Fast Turnaround: The values of such tiny stock can go up within a single trading day. Some stocks take years to see the same gains as penny stocks do.
The Cons:
Active Traders Required: If you don't have the time to invest into making fast, quick trades, then penny stocks may not be suitable for you. Investors who aren't quick on the ball may miss an opportunity to sell whenever a stock does go high, and as a result, will hold onto it until the profit shrinks or vanishes entirely. Invest only if you are an active trader.
Thin Trading: These type of stocks are thinly traded, which provides some measure of security for the investor, but also leads to sharp declines in value as well. Choose your stocks carefully.
Humble Start: Most penny shares are in small businesses. While Microsoft did begin as a small stock, a majority of these companies may not become profitable for some time. Sometimes it may take years for them to grow.
