Penny Stock Egghead Risks And Rewards

Penny Stock Egghead Risks And Rewards

Penny stocks are called that because sometimes that is just what they are: stocks that cost only pennies a share.

Though sometimes they can be as expensive as a few dollars, they are still considered penny stocks.

The reason they are so popular is because an average investor can buy lots of them with a small investment.

So if the stock does well, it is possible to make huge gains.

Blue-chip stocks like Google or Dell are far less likely to go up as fast.

That is because a 50 cent increase for a 50-cent stock is a 100% gain, but a 50-cent increase for a $100 stock is only a 0.005% gain.

And it is much harder for a $100 stock to double than it is for a penny stock to double.

So you can see why they become so popular.

But how do you know which ones to pick?

What Is The Risk?

The risks involved with this sort of investment strategy are fairly low, but there is a risk.

What happens to many people is they get too excited about a certain stock and start investing hundreds of dollars every day.

It is the same as someone at a casino who blows all their money on one machine because it paid them a thousand dollars earlier.

You have to know when to buy and when to sell.

However, if you are calm and methodical, there isn’t much risk involved because you can get a lot of stocks for only a few hundred dollars.

Then if the shares double, you’ve made several hundred dollars.

But if the shares fall, you might lose less than a hundred.

Therefore, there is a lot more upside potential with these as opposed to bigger stocks which can fall a lot more than they can rise.

Of course, people who are better at making picks, in touch with the market and well-educated are likely to do better.

So Is It Easy To Pick Penny Stocks?

Not exactly. Like I said, there’s more upside potential.

But even so, over 95% of them never go anywhere.

Of course, with a little research you can find out which of these companies seem to be worth the investment, but unfortunately it is hard to find good info on small companies.

They might have a cool name and a great idea for a product, but if it is a bad company with bad management, then it’s just a matter of time before their stock starts falling.

The secret is in being aware of upcoming promotions.

If you know a stock is about to be hyped, then you know it’s going to go up fast and that you better get it while you can.

So what should I do?

If you do not already have one, start by creating an account with e-trade, and make sure you at least have a basic understanding of how this stuff works.

When you are ready, move into the market gradually.

Follow some of the gurus and see what they’re saying, and start with one pick and a small investment.

You want to make sure you know what you are doing before things get really serious.

If you make some money right away, awesome!

If not, just be patient and keep learning. But the main thing is to not get too excited.

Like I mentioned above about the gambler who gets carried away, the same thing can happen to you with the stock market if you are not careful.

Penny Stock Egghead Risks And RewardsCreated by Kevin Brown – author of The Definitive Guide To Swing Trading Stocks, Swing Trader Guide is his online trading course that teaches people how to make money from stocks even if they have no experience and knowledge.

Read More Button