Are penny stocks smart?

  1. Kara Skinner profile image86
    Kara Skinnerposted 2 years ago

    Are penny stocks smart?

    Because penny stocks are so cheap, I am wondering if it's a good idea to make a few investments now-- less than a couple of dollars-- or if I should save for a more conservative investment.

  2. profile image0
    Wearmanyhatsposted 2 years ago

    It depends on your age and risk tolerance, you knowledge of the company, its performance record and the management team. Younger people can recover if a penny stock crumbles to dust, older people need to preserve their capital. Penny stocks are always cheap, that's why they are called "penny stocks." If you have a special insight on the company that compels you to invest in them, say the management team is exceptional, or you know they are about to bring out an innovative product, then the investment might be worth it. I always bought one particular company when the price was on the downswing, then sold it when it was at a high. The problem is that big trades like that can actually affect the stock performance, and finding a buyer of a large amount of shares can take time, allowing the price to cool. I would recommend balancing your portfolio with conservative investments to offset any negative action on your riskier stocks and over time, you will probably find what you excel at. For example, I found that picking retail stocks was never my strong suit, but I did well in sectors. I found I could do better on my own than with a mutual fund. Today I have many ETFs with a few downtrodden bounce-back expected stocks, and I don't have to monitor it daily as I did when I was day trading. My returns are just under 20%, and I'm happy. Hope this advice helps!

    1. tamarawilhite profile image92
      tamarawilhiteposted 2 years agoin reply to this

      Penny stocks are worth so little because there is so little value in the companies. It is close to gambling. Those who hype them will likely sell them when you buy it, because it went from 5 cents to 10 cents when you bought it.