Dunwoody Law Firm

There are a lot of ways to make money in the stock market, but penny stocks have captured the imaginations of many people far more than a lot of other investment vehicles.  This is because penny stocks can have wild fluctuations in price that can either make or break you as a stock investor.  For example, let’s look at a stock that is currently trading at one dollar.  If this stock goes up to $1.50, then all of a sudden someone who has invested $10,000 dollars in this stock now has $15,000!  All because of a measly fifty cent increase in the price of the stock!

So we can see how penny stocks have the ability to create great wealth, but they can also absolutely destroy your net worth if you are not careful.  Their large potential for gain is countered by a great downside risk as well.  The most important thing to do before you invest is get educated which is what this article is all about.  I’ll cover some of the most important things you should know before you really get into penny stocks.The first thing to do is make sure you have enough money to invest.  Although penny stocks are cheap, you want to be sure that any money you decide to invest is money that you are comfortable losing.

 Think of your first investment in the market as an investment in yourself.  You shouldn’t expect to make thousands of dollars on your first trade.  It could happen, but that is definitely the rare case.  What is more common is that you will learn a lot about how the market works and your own tolerance for risk.  You might find that you are a person who really loves the whole process and can’t wait to make more trades.  If this is the case then penny stocks may be the investment vehicle you need to hone your intuition and sharpen your understanding of the market.

The last thing to know before you dive in is that penny stocks are inherently riskier than higher priced stocks not only because they don’t cost as much, but because the companies that you are buying are less established in their respective markets.  This means that penny stock companies have a higher chance of crumbling but also a higher chance of blowing up and giving you an amazing return.

There have been stories of people who have “bet it all” on a particular penny stock and doubled, tripled or even made back ten times as much as their original investment.  That’s enough to make trading stocks a full time job for most people!If any of this interests you at all I would urge you to take a serious look at penny stock trading and do further research to see if it is a good fit for you and your particular temperament.  It can be a very rewarding thing to get into if you’re willing to put in the time to educate yourself.