Buying Penny Stocks

Buying Penny Stocks With Smaller Investment

Everyone desires more money. Many chase a multitude of get rich quick schemes only to find they are really get poor quick scams. Others rely on their own skills profiting greatly from buying penny stocks.

The stock market today is a dynamic and exciting place where large fortunes have been made. Those who are skilled at poker, negotiating and are quick with numbers are greatly suited to success within it.

Within the stock market there is an endless list of available stocks to buy. Many can be quite expensive when viewed in terms of how much you have to pay to buy one share. Most major stocks are at least $5, with most running above $20.

Let us assume you buy a share of a given stock for $20. Further assume you have a total of $600 to invest. You can therefore afford to buy 30 shares of the stock. This, of course, excludes commissions. However, today, there are online brokers who actually provide free trades so the above example can apply if you find the best deal.

So going with this example, let us say the stock you bought rises dramatically in price. What constitutes "dramatic". Let's use $100 as an example. That is a huge increase rarely seen in a stock of that price. You have selected a unique winner which is sure to be the highlight of that day's business news.

How much money did you make? You own 30 shares now valued at $100 giving you total value of $3000. Subtracting your initial investment, you made $2400. Not bad at all. However, let us look at another example.

Many stocks trade for much lower prices. Some even under $1. These are commonly referred to as "penny stocks". Whereas it is a truly rare occurrence for a $20 to move up to $100 quickly, it is far more common for a penny stock to run up to over a $1, maybe even $2, on a rapid basis when positive news comes out about the company.

If you buy a stock for 9 cents and it goes to $1.25, using the above example, your $600 turns into $8333. That is quite something. However, as with most things with life, the more potential reward, the higher the risk. If you can accept that risk than buying penny stocks is for you.

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