6 Strange Facts About Penny Stocks

There Are Several Strange Facts About Penny Stocks that You Don't Know

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Penny stocks are not your usual investments. In fact, they play by an entirely different set of rules, which leads to completely different results.

There is no shortage of myths and misconceptions about penny stocks, and there are plenty of strange, and probably surprising, facts.  Here are some of the most unexpected of all of them:

1 - Penny Stocks Should be in Your Portfolio

Of course, small, risky, volatile shares are not appropriate for everyone.

Of course, you should speak with your financial advisor to see if penny stocks are appropriate for you.  

The following thought is completely opinion only - my opinion alone. As the authority on penny stocks, and someone who is pretty good with knowing the difference between high-quality and low-quality companies, I feel that everyone could benefit by having some exposure.  

What other portion of your portfolio will provide the risk/reward ratio that penny stocks provide, as well as adding the dynamics of volatility and upside potential? In fact, some penny stocks are actually less risky than many blue chip companies, and also provide a great way to hedge against other stock market threats.

2 - Most People Have Traded Penny Stocks

Just about every investor has bought a penny stock at some point. They typically won't admit to it, since they lost money buying the wrong shares and for the wrong reasons.

Some treat their first penny stock trade as buying a lottery ticket, then as the business model doesn't work out, they just let the investment slide towards zero.

In addition, consider the fact that penny stocks are shares valued at $5 or less. That puts some pretty significant, widely-owned investments into the low-priced territory.

From that technical perspective, many people have owned, or even now may hold, shares in penny stock companies.

3 - Rapid Wealth

Ignore the promises of rapid wealth and yachts and Lamborghinis, because anyone can sell this way, and it is almost certainly done by those not making money on the markets. However, it IS possible for the generation of rapid wealth through penny stocks. You can turn a few thousand dollars into a small fortune, and it has happened many times.

It all comes down to picking the right shares and thinking of them like a business (rather than a stock), and as the underlying company grows, the stock price will follow suit. The best way to analyze any penny stock to find the big winners is to put the potential investment through a full Leeds Analysis review.

There are numerous empires which were born from penny stocks. Just check out Casa Loma as one example, paid for with fortunes created from penny stocks. The fact that I had my wedding there is only partially coincidence.

4 - You Know Them

Many penny stocks are companies that you know. Whether or not you realized this fact is another matter. I have written an article on some of the most well-known companies trading as penny stocks.

5 - Penny Stocks Change the World

All the most impactful companies start small. Unique, surprising, crazy, disruptive technologies typically begin as ideas, and most of them don't go much further.  

Of course, there are the ones which catch and are embraced by society across the globe. These are the world-changing ideas that test the limits and turn convention on its head. They generally start out small.  Really, really small.

Do not assume an idea or service or product is bad simply because the underly shares are trading in penny stock territory. Children often grow up to be just as big as adults!

6 - Comical Risk Avoidance

The risks which give penny stocks a bad name are so easy to avoid, that it is almost comical.  As long as you look into the financial position of any company you are interested in and don't believe free newsletters, promotional e-mails, unsolicited faxes, or shady phone calls, you will be fine.

Remember the 3 Rules of Penny Stocks:

- never follow free stock picks

- always look for the 100% Unbiased Guarantee

- check the balance sheet and income statement before you invest