If you’re a beginner to the stock market, then not only could all the lingo be difficult to understand but the financial barriers may be tough as well. If you are planning to build a strong stock portfolio, with Fortune 500 companies like Dell, Target, Siemens, etc… it’s gonna take a lot of money to fund that kind of portfolio. You’d need at least $30-40,000 to start that kind of venture. If you are a beginner in the stock market, chances are you don’t have this kind of cash. Well, trading penny stocks is the perfect way to get your feet wet in the stock market.
Penny stocks give you the incredible leverage that most of the well established companies can’t. When I say leverage, I mean more bang for your buck. For instance, if you had $2000.00 how many shares could you buy of XYZ stock when it’s at 50 cents a share? That would be 4000 shares. Now, how many shares could you buy of Pepsi stock (currently around $65 a share)? That would be about 30 shares.
Now, this is where leverage comes in. Which one do you think has the better chance of significantly increasing in value? If you said Pepsi, you’d be incorrect. Think about it. Companies like Pepsi are already established. These are the kind of companies that people hope to get a 10% yearly return. The penny stock on the other hand is perfect for stock market beginners because of the actual potential. Some penny stocks have known to increase by as much as 400% a day.
The reason for that is because it doesn’t take that much to move them. What’s a 400% increase in in a 50 cent stock? That would mean the price went to $2.00 a share. An increase of $1.50 a share. Not that big of deal, right. Now think about Pepsi increasing by 400%. That would mean Pepsi would go to roughly $260 a share. You could probably hold Pepsi stock for 30 years and you won’t see that kind of return, simply because there is a roof on their growth. They are an established business and companies like that just don’t have that kind of growth.
By: Chris Braff
About the Author:
Chris Braff has become an extremely successful penny stock trader. He found a system which tells you where to find penny stocks that have the most chance of increasing in value. Click here to find out more information.
