Why Invest In Penny Stocks?

March 8, 2009 by  
Filed under Penny Stock Trading

What is so attractive about investing in penny stocks? For most people who are penny stock investors, the price is the initial lure. But along with the low price of less than one dollar a share, there is also the possibility that the stock will really soar and make money for the stock investors.

Penny stocks are usually offered by companies that are just starting out on the stock exchange. They consist of stocks that are sold very cheaply. Some investors will say that penny stocks are less than one dollar a share while others state that penny stocks are those stocks that are less than 50 cents a share. These stocks can go up or down depending on how well the company does. There are two ways to invest in penny stocks. Both of them involve research into the company as well as the industry in which the company is involved.

One way to invest in penny stocks is to day trade. Day trading is when you watch for fluctuations in the stock market. The stock market is always going up and down and most stocks fluctuate throughout the course of the day. A day trader is in it for the short term. They invest in penny stocks for a certain amount and then sell the stocks after the price reaches a certain amount. Day traders often use software that enables them to trade their penny stocks and automatically enter the market as well as sell them at prices that are predetermined by the stock investor. Some day traders will watch the market on their own and trade in this manner.

Another way to invest in penny stocks is to invest in the stocks for the long haul. Holding some penny stocks in the stock portfolio with the hope that they will rise in value is something that many stock investors do. They speculate that the stock will rise in value in the future and put the penny stocks into their investment portfolio.

Whether you invest in penny stocks for the short term, such as a day trader, or for the long term, such as keeping the penny stocks in a portfolio hoping they will rise, the secret to successful stock trading is to watch the stock market and learn as much about the penny stock companies as possible. You should also know about the industries that the penny stocks are involved in as well as be able to follow the trends in the industry.

Armed with this type of knowledge, you can enter the stock trading world buying penny stocks for a fraction of what you would pay for more established stocks. You can start your stock trading investment plan for a lot less money when you start out by trading penny stocks, which is the reason why many stock investors find that trading penny stocks are so attractive. When combined with the chance that the stocks will rise high, penny stocks are a very attractive choice for many stock investors.