With stock market gains moving at a snail’s pace over the past decade, some experts have their sights set on the not-so-new darling of the trading world, penny stocks.
Generally described by the Securities Exchange Commission as stocks that trade for less than USD 5, penny stock trading is not for the faint of heart and can be a risky proposition. There is potential, however, for a higher return on your investment; in layman’s terms, you could get a better bang for your buck.
As risky as it may be, the very reason that investors are flocking to the penny stock market is its potential higher growth. Look at it this way: Because penny stocks are prone to rapid changes, those who invest might just luck out with a stock that will jump from 10 cents to USD 10. Some penny stocks can reach a 1,000 percent return.
In a world, where IBM stock is trading above USD 180 a share, that same investor could afford about 1,000 shares of a stock such as The Movie Studio, at 0.8 cent or Global Fashion Technology Group, formally Premiere Opportunities Group, with a stock price of just 0.7%, making these risks potentially worth the reward.
Mitchell Schultz, international investor relations manager for Premiere Opportunities, said, “The reality is that if you do your homework, you can successfully trade penny stocks with very little money. In this way, investors could make a lot more money trading in the pennies, than with bigger stocks.”
Jonas Elmerraji, a penny stock specialist at Agora Financial in Baltimore, agrees.
In an interview, Elmerraji told the Pittsburgh Post Gazette, “Penny stocks are exciting because of the opportunities involved. So, their growth potential is much greater than a blue chip stock. That’s the real draw.”
How do you discern between a potentially high-growth company that could yield a potential windfall and, well, one that won’t? Experts suggest investors look at a company’s underlying business before committing any money, companies that have real, sustainable operations. In addition, investors should look at a company’s financial statements to discover whether the company files on time, who its auditing firm is and whether the company looks financially healthy.
Before investing in any stock, check with your financial advisor, accountant and attorney, and perform your own research.