Yesterday we looked at the concept of penny stocks. We examined the fact that penny stocks are high risk investment, whose value is oftentimes $5 or less. Penny stocks often are not traded on the major exchanges, but have become increasingly popular due to their price.


If you are in the investment market you will find that daily you are bombarded by Companies that are seeking to entice persons to buy penny stocks. However, one must never go into any investment with their eyes wide shut. We have seen over the last 2 years the effect that unplanned investments can have on our lives. Many investment schemes blossomed with claims of high returns, and in the end we all got burnt. It will take us a long time to recover the monies that we lost, but we have to start somewhere.


The benefit of penny stocks is that you can invest small amounts and trade large units. In effect you could spend $500 on a stock and control 10,000 units of that stock. If that stock moves by say 3% in a month, you would have added an additional 300 units to your original value. In effect your dollar value or unit price per share would also increase by 3%. However, there is always a flip side to any argument, the negative effect is that you could also lose 3% on your investment if the stock does not go the way you want it to go, remember eyes wide open. The advantage though is that the capital investment is small. The other advantage is that you will learn over time that you have to be monitoring your stocks daily. You should never be fooled by banks into thinking that you give an investment adviser your hard earned money and go to the beach or better yet, stop working. This is what they have gotten many people to believe, and before long they have lost all their money.


In the upcoming articles we shall look at all the concepts involved in trading these stocks and the pitfalls. Plus I will recommend some stocks that I am trading and some that I am researching. Your feedback would be appreciated at any time, so as to teach others and just so we can help each other.