Let’s face it, we’ve all heard the stories of rags to riches in the investment world. More often than not, these stories come from some sort of transaction involving a penny stock. We’ve all probably seen Wolf of Wall Street, but we all can’t be Jordan Belfort. Most of the people who choose to go down that path will only find their bank accounts and morale severely depleted.
That being said, if you are comfortable with taking on a substantial amount of risk, there are some benefits to penny stocks. There seem to be two types of sites on the internet these days. Those who preach penny stocks and show videos of the trader strutting through their million dollar mansions, and those who practically classify penny stocks as a version of the bubonic plague. There has to be a middle ground right? Well, you’ve come to the right place. In this article, I will weigh the pros and cons of investing in penny stocks so you can really decide what’s best for you.
The Pros Of Investing In Penny Stocks
The possibility of a massive payday
Just like gambling in a casino, the possibility of hitting it big is always there. Just like a poker player can gain a definitive edge over the rest of the table at the casino, you too can at least tilt the odds in your favor with proper research of penny stocks.
Increased volatility makes for quicker returns
Typically when you invest in a growth stock on the TSX or the NYSE, you’re looking to see some growth over the next 1,2 or even maybe even 5 years if you’ve got the patience. You can see exponential growth from a penny stock in a matter of days, and sometimes even hours. Obviously, this works the other way, but we will leave that for the cons section.
Not all penny stock companies are poorly managed
A lot of naysayers towards the penny stock industry believe most all companies traded on the pinks are poorly managed and have poor financial evaluations. This couldn’t be farther from the truth. There are a ton of solid companies that simply are not big enough yet to trade on the big exchanges. This is what can separate a good from poor penny stock trader, finding these diamonds in the rough.
