Pros and Cons of Trading In Penny Stock Market

We must have heard of campaigns, in the recent past, encouraging people to include stocks in their investment portfolio. Investment on the stock market exchange was associated with high returns on investment (ROI). But there was one problem – shares trading at very high prices. Therefore, the stock exchange market remained to be the playground of the rich people only, who don’t operate on tight budgets. However, thanks to the introduction of penny stocks. If you are ready for recommended penny stocks, Microcap Millionaire Newsletter is your good choice.

Penny stocks refer to shares that trade at unique low prices – $5 and below per equity. This has enabled people with low income to secure a place in the stock exchange market. The issue of penny stock has raised so much controversy in terms of relevancy. Some sources claim that investment in that market is not a good idea whiles other sources encourage investment into penny stocks. In this article, we shall inspect both sides of the coin, i.e. the pros and cons of penny stocks.

Low Price – pro

Who on this planet doesn’t like investing in cheap resources which promise high ROI? Any stock that trades at $5 or less is referred to as penny stock. Sometimes it may also include stocks trading at a price between $5 and $10. All in all, the price is cheap. One can buy more shares in this market by tying up just a small amount of cash. This is contrary to stocks in the typical stock markets such as NYSE or NASDAQ.

Great ROI Potential – pro

When the penny stock prices decide to explode upwards, investors could be linked to ‘printing money’. Small and emerging companies are said to use penny stocks in raising their equity capital. This helps the companies to grow their value upwards. Once the value of the companies rise, prices of the equities issued can increase over a very short period of time. That’s how investors in penny stocks can get rich quickly.

Short-term Stock Investment – pro

Generally, an investment in the stock exchange market is considered as long-term investment. Unlike the typical stocks, penny stock investment is ideal for short-term investment because of the high likelihood of changes. As much as you invest in normal stock, you should also consider penny stocks as part of your investment portfolio in order to increase your investment liquidity.

Big Risk Involved – con

As you invest in penny stocks, you need to be prepared for potential money losses. Most companies that issue penny stocks are in a quest of securing capital to pay debtors or avoid bankruptcy. Therefore, penny stock is a sign of a company in financial distress. They want to attract high demand by offering their shares at low prices. Is this not a risky investment? Just think about it alone.

Volatile to Price Swings – con

Price swings in a penny stock market are highly exaggerated. The same way prices can explode upwards is the same way the prices can collapse downwards. Investors should be on the run always to track their stocks and sell them immediately when they realize reasonable profits. If you have low risk tolerance, it’s advisable not to invest in penny stocks.

Market Frauds due to Less Regulation – con

Penny stock market is not suitable for the buy-and-hold investors. Secondly, if you are unfamiliar with the market, it’s better to keep off or seek good assistance. This is because the marketplace is filled with fraudulent practices such as stock price manipulation. There is no enough transparency, so companies can deceive investors when it comes to stock prices. For more cons and pros of penny stock, visit the Microcap Millionaire Newsletter Review Here.

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