The game of investing is one that is not without sets of rules, tips and tricks. There are subtle nuances that sometimes even savvy and experienced investors forget or ignore, inevitably costing them valuable profits in the long run. Sometimes it’s pulling out of an investment too early, other times staying in too late. Maybe it’s a failure to diversify or a hair trigger and lack of self-confidence that is your undoing, or maybe it’s putting too much money into stocks that don’t have the potential for valuable returns.
An incredibly common question that those in the financial and investing sectors get asked is “how do I make money with penny stocks?”
The short answer is, you don’t. Or at least, you shouldn’t try to if you’re not able to incur huge amounts of risk for what will likely be a marginal payoff.
People spend time scouring the market for micro-caps that they believe will be the next big thing–the thought being that if you can locate the next Amazon, or Apple you’ll be a millionaire in due time. The reality of the situation is that these stocks are very, very few and far between, and playing penny stocks daily is a huge commitment.
The fact of the matter right now is that you’re more likely to lose money playing penny stocks than you are to earn any. On top of that, the money you do make will be marginal–returns on penny stocks are returns on very, very small investments. This is an easily understood but often-forgotten aspect of trading penny stocks.
You’ve seen the stories of people who have become millionaires trading penny stocks, though, so you’re probably still interested. Note that the reason these stories are written is because of how rare they really are. It’s the same reason that it makes headlines when a dog rides a skateboard, but not when a human does it. No one wants to read about the millions of people who make next to nothing trading penny stocks, so the hype that surrounds them remains.
Should you choose to invest in penny stocks, patience is a virtue if you want to see any form of return, as is a knack for research and ample time to set aside for trading. Because penny stocks are prone to manipulation (pump and dump being particularly common), stocks that you’re considering purchasing should be researched heavily. Know what you’re investing in, and be comfortable spending hours and hours each day in front of a computer buying and selling on top of the research. That’s how Tim Grittani made headlines–time, effort and patience.