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Are All Penny Stocks Scams?

When it comes to penny stocks, there’s a lot of misinformation and fear. Financial pundits will tell you that they’re all scams and to stay far, far away. But that doesn’t mean there’s no money to be made on them. With the right research, patience, and discipline, the volatility that penny stocks can provide can result in extreme profits. Most people are afraid of penny stocks, but there’s certainly profit-potential there if approached correctly.

While only a select few penny stocks actually turn into big-time companies, the majority will eventually fail over time. With that in mind, it’s usually very difficult to pick successful long-term investments. The most success in the penny stock arena comes from knowledgeable day and swing traders who attempt to take advantage of the short-term momentum and volatility that blue-chips typically can’t provide. The bottom line is that certain pieces of news, contracts, and various events mean a lot more to smaller companies as opposed to larger ones. And as a direct result, penny stocks can make huge 50-100%+ moves in just a matter of hours if the catalysts are strong enough – moves that will never happen with large caps. Overall, long-term blue-chip investors tend to expect a 10% yearly return on average, but penny stock traders typically shoot for that type of return on just one single trade.

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