Penny Stocks? You Must be Kidding!

Penny Stocks Have a Downside, but They Also Present Plenty of Profit Potential

Computer screen displays laptop graph of financial trends.
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There are many well-known risks surrounding penny stocks, and in fact most of them are quite well earned.  They are riskier companies, and their shares are much more volatile. 

Add to this the fact that scam artists use low-priced stocks to trick old widows and unsuspecting investors out of their money, while other promoters talk up even the most doomed, bankrupt, and worthless shares.  Even among legitimate companies, we estimate that 95% of them are not great investments.

Well the good news is that it is quite simple to avoid all the down-side, by following three clear rules.  Then, you are open to all the good side of penny stocks, which includes;

  • significant gains
  • rapid price moves
  • getting in early on growing businesses

The three rules which will help you sidestep the pitfalls are straightforward and would have eliminated almost every single dollar of investor losses.  These concepts are simply:

1. Never buy penny stocks you heard about for free

2. Never buy penny stocks that trade on the Pink Sheets or OTCQX markets

3. Always put a company you are interested in through Leeds Analysis

By only considering investing in penny stocks which pass the three tests above, you will be in a significantly safer position.  You are almost certainly going to avoid all the scams and downside which have given penny stocks a much-deserved bad reputation.

You will also be able to capture some of the massive gains penny stocks provide, and which have helped interest in the small shares grow substantially over the last few decades.

 Indeed, Google searches continue to grow, with "penny stocks" now outpacing queries for "stockbroker," "stock pick," or "NYSE." (New York Stock Exchange)

As the authority on penny stocks, I can tell you that there are major gains to be made.  Many of the best up-and-coming companies in America trade as penny stocks right now, simply because they are brand new businesses, undiscovered, or have fallen out of favor with investors.

In other words, there are some significant opportunities for investors with higher risk tolerances, but who are willing to do the work required to look into the operations of the underlying businesses.  Whether that means calling the company and asking questions, or going over their financial results at 2 in the morning, the rewards will be absolutely outsized.

The say fortune favors the bold.  Well, that may apply to trading low-priced shares, but should not be confused with "fortune favors the impatient, or dumb, or lazy."  

You need to work hard, but that eventually becomes easier.  Once you get used to whatever process you use for analysis, you'll be able to quickly run any penny stock through your protocol to determine the quality of the investment, as well as the potential for their shares to increase.

So, don't take it personally when your family scoffs when you tell them about the latest penny stock in which you are interested, or your stockbroker nearly falls out of his chair when you tell him what you bought.  Just rest assured that you followed the three rules to protect yourself, and the ten cent stock you bought is an investment in a high-quality company.