When it comes to financial media, they have a one track mind. Their sole focus is on long-term, buy-and-hold investing. They obsess over large market cap stocks like Facebook, Amazon, and the rest of the FANG Stocks. Leaving limited to no room for discussions on lower-priced Penny Stocks. But the reality is that these lower-priced stocks can offer some of the best profit-potential of any securities. Although most of the “talking heads” on TV will never admit that. They simply bash penny stocks every opportunity they can, calling them dangerous and unproven. Because of this, 99% of the world hates them. They’re not necessarily wrong about the risks, but what they never seem to grasp is the concept of Trading vs. Investing.
They’re right in the sense that penny stocks aren’t really tickers you want to buy-and-hold. Sure, some of them may grow to become legitimate companies with successful business models that generate solid revenues, but the majority of them eventually fail. The majority of opportunities are in the short-term price movements. It’s the volatility that makes them so attractive amongst disciplined traders. In other words, individuals with the most success trading lower-priced stocks are implementing a short-term day or swing trading approach. Overall, a 10% annual return on your money, which is the Average Return of the S&P 500, will barely move the needle on your portfolio, especially if you have a small account. As a result, many traders ultimately turn to penny stock trading for more robust 50-100%+ returns. Some even make a career out of it.
Related Post: Why Trade Penny Stocks – Aren’t They Worthless?