If you are interested in entering the world of online stock trading, you may have already heard quite a bit about trading in penny stocks (also known as microcap stocks).
Some will promote penny stocks as the best thing since sliced bread, arguing that you can earn loads of money with the right investments.
Others will warn you away from them altogether, saying they are too risky to invest in.
So who is right? Well, the short answer is both.
Microcap stocks do have great earning potential but they also can be risky investments, particularly if the stock value has been falsely inflated through deceptive marketing techniques.
Penny stocks can be very profitable investments if you pick the right ones to invest in.
This is because, in part, your buying power with microcap stocks is so much greater when compared to regular stock offering.
For example, if you have $1000 to invest, you might purchase 10 shares of a regular stock that trades at $100.
If that stock's value increases by $1, then you have made only $10.
On the other hand, if you purchase a microcap stock for just $1 a share, you can get 1000 shares of that stock.
If its value increases just by twenty cents, you will have earned $200 in comparison.
Unfortunately, penny stocks also have the reputation of being particularly vulnerable to deceptive marketing practices.
For example, some companies may pay an individual or groups of individuals to promote their company's stock on message boards and by giving false reviews of the company.
This means that with any stock offering you select, you will need to be extra vigilant in terms of your analysis to make sure that it is not being falsely promoted.
Given the enormous potential but also considerable risks when investing in these offerings, you will want to make sure you have a sound investment strategy before entering into the microcap stock market.
Some will promote penny stocks as the best thing since sliced bread, arguing that you can earn loads of money with the right investments.
Others will warn you away from them altogether, saying they are too risky to invest in.
So who is right? Well, the short answer is both.
Microcap stocks do have great earning potential but they also can be risky investments, particularly if the stock value has been falsely inflated through deceptive marketing techniques.
Penny stocks can be very profitable investments if you pick the right ones to invest in.
This is because, in part, your buying power with microcap stocks is so much greater when compared to regular stock offering.
For example, if you have $1000 to invest, you might purchase 10 shares of a regular stock that trades at $100.
If that stock's value increases by $1, then you have made only $10.
On the other hand, if you purchase a microcap stock for just $1 a share, you can get 1000 shares of that stock.
If its value increases just by twenty cents, you will have earned $200 in comparison.
Unfortunately, penny stocks also have the reputation of being particularly vulnerable to deceptive marketing practices.
For example, some companies may pay an individual or groups of individuals to promote their company's stock on message boards and by giving false reviews of the company.
This means that with any stock offering you select, you will need to be extra vigilant in terms of your analysis to make sure that it is not being falsely promoted.
Given the enormous potential but also considerable risks when investing in these offerings, you will want to make sure you have a sound investment strategy before entering into the microcap stock market.