Finding Profitable Penny Stocks
Micro-cap and penny stock investing is becoming an increasingly popular choice for new investors and experienced investors alike. People who are new to the stock market with limited capital like them because they can purchase some real volume for affordable prices. People who have been in the market awhile know that it is not a good idea to put all of their eggs in one basket and instead buy penny stocks since they have the potential to generate high returns. This is high risk trading, but high risk can also mean high reward.
Finding a profitable penny stock and entering into a position at the right time can literally give 1,000% returns over a relatively short time period. Hard to believe? The following example will illustrate how lucrative the right penny stock can really be.
Let's say an investor decides to purchase 1,000 shares of a stock that costs 5 cents per share. This will cost the investor a measly $50 dollars. The investor just buys the stock and lets it be, checking it periodically. Fast forward to 2 years later. The company has had some success and is steadily expanding. The stock is now valued at $1.13 per share. The original 50 dollar investment is now worth a whopping $1,130 dollars! Not too shabby for such a small initial investment. Well over 100% per year. If $1,000 dollars was invested at 5 cents per share instead of $50 dollars, the stock would be worth $56,500 dollars. The key to success with penny stocks is making a very educated investment.
Finding good penny stock picks is not easy, otherwise everyone would be doing it. However, a determined investor who knows enough about a particular industry and chooses a company for the right reasons can do very well with penny stocks. Even if they choose wrong 4 out of 5 times, they would still be making obscene profits, hence the great lure of micro cap investing.
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