Why Buy Penny Stock?

Answer 1

Investing in the Stock Market is still one of the most popular ways to grow your wealth over the long-term, but many investors are not satisfied with traditional stock investing. Due to recent performance issues in the major stock exchanges, some investors are looking for alternative means of investment. In this situation, you may want to buy penny stock, because it represents a vast opportunity for growth over the long-term.

What is Penny Stock

Penny stock is essentially just like any other stock because it provides you with a share of ownership in a company. The key difference with penny stock is that you can buy shares for very small amounts of money. Most people consider penny stock to be anything that sells for less than $5 per share. In some cases, you can get shares of stock for less than $1 each. The companies that fit into this category are not listed on the major stock exchanges because they do not meet the requirements for being included. Some of the companies are still very large and well-known brands, but they simply aren't big enough to be included on the New York Stock Exchange or the NASDAQ.

Potential for Large Returns

One of the biggest reasons that you may want to buy penny stock is so that you can realize large potential for returns. When you invest in penny stock, you can accumulate a large number of shares with only a minimal investment. At that point, it doesn't take much movement in the price of the stock to significantly increase the value of your investment overall. Compared to bigger stocks, the price does not have to move very much to make a difference.

Caution

When you buy penny stock, you also have to be careful. Most of the companies in this category of stocks do not turn out to be very big. Because of this, you have to do your homework to make sure that you are investing in a company that has a chance to grow over the long-term. Otherwise, you might end up throwing all of your money away.