Are Penny Stocks Right For You?

Penny stocks appeal to millions of investors or potential investors. Low-priced shares have probably caught your attention, too. Take a moment to consider if trading penny stocks is actually appropriate for you.

Penny stock investing may be more appropriate for individuals who

  • Are willing to do the work required. Investing in speculative shares requires effort on your part. Proper analysis, performing due diligence, and monitoring the shares you purchase, all require work. Investors who put in the time garner the greatest rewards.

  • Possess a high tolerance for risk. You will enjoy penny stock investing more if you can tolerate risk and volatility well. If you are going to lose sleep over 20 percent price swings, safer investments may be more appropriate for you.

  • Intend to invest “play” or risk money. It would be a mistake to invest money you need for your child’s education or to buy groceries in speculative stocks. Penny stocks are best traded with money you have set aside to have some fun with rather than with funds you will need for the important things in life.

  • Are skeptical of what they read. The penny stock industry is filled with hidden motivations and misleading reviews of the companies. Don’t believe most of what you read, and always perform your own due diligence.

  • Have realistic expectations. You might make some good money trading penny stocks. However, if you’re expecting to become a millionaire from a $300 investment, you will be disappointed.

  • Have time available for research and trading. Unlike day trading or options trading, you won’t need to be glued to multiple computer screens all day long. However, the more time you can set aside to research your shares and monitor them, the greater the level of success you will probably enjoy in penny stocks.

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