4 Rewarding Reasons to Invest In Penny Stocks

4 Rewarding Reasons to Invest In Penny Stocks

Most of the risk-averse investors shy away from penny stocks as these are considered volatile and focus mostly on blue chips. But, the aggressive investors who love to take risks trade in these low-priced picks and double or quadruple their investments in short time.

Let’s see few of the rewarding reasons to invest in penny stocks.

  1. Needs Less Capital: As they don’t cost much, you can trade more with less capital as against the blue-chip stocks, which are costly and hence require more capital in hand. If you are trading, then you can buy more penny stocks for the same capital than what you would be able to buy for large caps or blue-chips.

  1. Limited Downside: You can get penny stocks for few cents. Let’s say you bought a 25 cent stock. Here, the risk is that your entire 25 cents can wipe off, but that’s the maximum downside. On the other hand, it can go up to $1, which is phenomenal return. The chances of a 25 cent stock to reach $1 are always greater than a $25 stock touching $100 in the same period.

  1. Multi Baggers Can Make You Rich: If you found the best penny shares to purchase with your deep research and you believe that these particular stocks have the potential to rise, then buy and sit on it. Often, the right pick of penny stocks turn out to be multi-baggers and you can earn very handsome returns to the tune of 500-600 percent on it. However, you need to research well and then wait patiently for the stock to rise.

  1. Easy Diversification: As these stocks come very cheap, you can easily diversify your portfolio by picking such stocks in separate sectors with a small capital of say $5000. Even if one or two sectors that you have invested in perform well, you can reap rich benefits. The same cannot be done if you buy a high priced stock because then you would be stuck in a single sector or at the most two sectors and if those sectors turned out to be laggards your money gets stuck.

Penny stocks are a high-risk, high-gain game, which is not for the weak-hearted. Here you can either make good returns in relatively short period or your capital can just disappear.

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