For those of you who don't know what a penny stock is, a penny stock is essentially a stock unit that trades for $5 or less.
Why would you even bother with such small fry stocks? Well, although penny stocks are high risk (as you can lose your money as quickly as you gain it), there is the potential for enormous returns - and of course, the buy-in is low.
As the saying goes: the higher the risk, the higher the potential return. If you're a young go-getter with perhaps a $1,000 or less you'd like to gamble wisely in the stock market, then perhaps penny stocks are for you.
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Penny stocks are a risky business
Before we delve any deeper into the realms of penny stocks and which ones to look out for, we feel it is our responsibility to reiterate the risks of penny stocks to you, our loyal reader.
Penny stocks are considered to be among the most speculative, high-risk investments you can make for more than a few reasons:
- Usually, companies affiliated with penny stocks are tiny in size. For instance, a penny stock with a market capitalization of $50 million is just a drop in the water when compared with a large-cap colossus like Johnson & Johnson, which carries a market value just under $300 billion.
- Penny stocks could be offered by companies that are brand-new and don’t have any actual profits from their operations. These companies are unproven because of their short operating history and lack of a track record. Large-cap stocks, on the other hand, tend to be businesses that have been around for a good while - organizations that generate significant profits which can be reinvested in the business for further growth or paid out to shareholders through dividends.
- A penny stock could also be a company on the verge of bankruptcy. This higher risk of default and uncertainty makes investing in penny stocks incredibly speculative.
It's clear that penny stocks carry risk, but they can prove very fruitful for those who play their cards right. If you feel that penny stocks are too unpredictable, check out these other savvy ways you can invest $1,000. If you feel you'd like to dip your toe into the world of penny stocks, we'll continue.
The stock market to me was like a video game. When it went off, it was like turning the game off. It wasn't something I'd think about until I'd turn the machine on again. - Jo Nesbo
Hot penny stocks for 2017
By their very nature, stocks and shares shift and move constantly. To benefit from live updates and the latest penny stock news, All Penny Stocks is an excellent resource. Without further ado, here are hot penny stocks you may want to invest in this year:
A defence design and manufacturing company honing in on two of the biggest growing industries next year: Drones and Virtual Reality
Yes, believe it or not, you can dabble in Twitter penny stocks. Having won rights with the NFL for Thursday Night Football, Twitter’s fanbase is likely to shoot through the roof since a huge audience is going to sign up for Twitter to watch their favorite games.
FIVE has seen a 25% growth this year alone. With more than 400 stores, FIVE is a regional brand that with an enormous amount of potential.
John Bean is a company that supplies air transport and food processing industries with solutions and materials. The modern consumer lifestyle has increased demand for food packaging and John Bean's input in the production of packaging is cheap, which makes for high-profit margins.
In order to carry a positive action, we must develop here a positive vision. - Dalai Lama