Are Penny Stocks Worth it?

Ever considered trading Penny Stocks? If not and you’re wondering what they’re all about, you’re in the right place! Alternatively, if you’re just interested in finding out what the key fundamental events of the week are going to be, sit tight, we’ve got you covered too!

Wait, what’s a Penny Stock?

Also known as Micro Caps, Penny stocks are the shares of companies that trade below $5 USD.

As a rule, these stocks have low prices and therefore low barriers to entry. They are seen as being highly volatile instruments and, like all financial assets, should be treated very carefully.

Penny Stocks are typically traded outside of the major market exchanges.

Are Penny Stocks popular?

That low entry barrier makes these guys super-popular. Much like cryptocurrency trading, the fact that you can buy large quantities with a relatively small upfront investment is very attractive to speculative traders.

Despite their perhaps confusing name, there’s actually no limit to how high a penny stock can go. Many of the stocks that are soaring today, once traded below the $5 USD mark. Amazon, Apple and General motors all entered the market at the “Penny Stock” phase.

And, not to make you feel bad, but had you invested $1,000 USD in Amazon back in 1997, your stock would be worth over $49,500 today, a rise of 4,863.09%. Yowza.

What makes Penny Stock trading risky?

Penny Stocks are much riskier than normal stocks, for a couple of important reasons.

#1 Lack of information

The cornerstone of any successful trading strategy is research. Quite simply, there’s not a lot of that around for Penny Stocks.

These assets are low priced because their companies are in their infancy and not much is known about them. This makes them highly risky. Serious traders wouldn’t usually invest any amount of money in something they cannot fully weigh up. Finding sufficient information can be tricky.

#2 Potentially poor liquidity

Penny Stocks as a whole are popular instruments, but individual Penny Stocks aren’t always so, which can mean a lack of liquidity for some.

If that happens, you might struggle to sell your stock if you need to, as there may be a lack of buyers willing to buy it from you. Not so good in the world of trading.

So, are Penny Stocks worth it?

The answer to that question depends entirely on how much you’re willing to risk. The low price and easy entry can seem like a bargain, but the hidden risk of volatility is too much for many traders.

Are Penny Stocks worth it? Amazon has at least proved that they can be! But, as with any instrument, it’s vitally important to remember the golden rule of trading, only invest what you can afford to lose. Just because AMZN stock went to the moon, doesn’t mean everything will. There are no guarantees in trading.

Pick a stock, do your research, hone your strategy and after a lot of hard work maybe, just maybe, you might turn a profit. Be careful!

What’s on the trading agenda this week?

There’ll be a quiet start to a crazy-busy week ahead. Here are all of the top events to trade in week 28.

Monday

No major events scheduled.

Tuesday

● EUR — Germany Inflation Rate YoY Final (JUN)

● USD — Core Inflation Rate YoY (JUN); Inflation Rate YoY (JUN)

Wednesday

● AUD — Westpac Consumer Confidence Index (JUL)

● NZD — Interest Rate Decision

● GBP — Core Inflation Rate YoY (JUN); Inflation Rate YoY (JUN)

● CAD — BoC Interest Rate Decision

Thursday

● AUD — Employment Change (JUN); Unemployment Rate (JUN)

● CNY — GDP Growth Rate YoY (Q2)

● GBP — Employment Change (APR)

Friday

● NZD — Inflation Rate YoY (Q2)

● JPY — BoJ Interest Rate Decision; BoJ Quarterly Outlook Report

● EUR — Core Inflation Rate YoY Final (JUN)

● USD — Retail Sales MoM (JUN)

● USD — Michigan Consumer Sentiment Prel (JUL)

Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.

Speak soon!

The Contentworks team