Chances are you’ve heard about penny stocks. Even if you’ve never purchased stocks in the past, you’ve probably heard someone on the news mention this investing option. But is it right for you? Could you be one of the few that makes millions investing in these inexpensive stocks?

Investopedia states that, “Penny stocks are typically growing companies with limited cash and resources. In other words, most penny stocks are high-risk investments with low trading volumes and limited attention from investors. These companies trade mostly on the OTCBB and Pink Sheets and are susceptible to different forms of market manipulation that are less prevalent and more difficult to employ in stocks found on the Nasdaq and NYSE.” In other words, these are inexpensive stocks from unknown companies that can lead to big profits or big losses.

Are Penny Stocks A Smart Addition To An Investment Portfolio?

Do you have the Time to Invest?

There’s no denying the fact that penny stocks can be affordable to invest in. This allows anyone with a small budget to invest. However, what most people don’t have is time. Those that invest in penny stocks professionally watch the market continuously so that they trade at the right time. Numbers can rise and fall within minutes. In other words, unless you want a second full-time job, penny stocks may not be the best investment option. On the other hand, some investors treat it like a game. The key is to never invest more than you’re willing to lose.

Why most People won’t make a Killing on Penny Stocks

The biggest reason most people won’t make a killing off penny stocks is the lack of research. Even big investors like Timothy Sykes put a lot of effort into their choices. Part of the time invested in trading penny stocks is researching the companies you invest in. You need to stay on top of trends so that you know the exact moment to buy and trade. Another reason penny stocks won’t pay off for most people is the lack of interest. Most people don’t want to sit in front of their computer or constantly stare at their smartphone, waiting for the right moment. Lastly, while penny stocks are affordable, those that make millions invest a lot of money. For example, stocks that cost $1 per share might be purchased in increments of 5,000 or more shares. In other words, those that want to purchase 20 shares won’t see a big profit. You have to go big when investing in penny stocks.

Penny stocks are an interesting investment. However, investing in penny stocks in order to see a large profit takes time and a lot of money. You have to be willing to invest thousands of dollars and then do your research so that you sell at the right time.