I know that penny stock trading isn’t a real big focus on Wall Street. But to that I say, who cares? Sometimes the best things in life aren’t necessarily what is popular. That being said here are some advantages to trading these kind of stocks:
Leverage: There is nothing else in the stock market that can compare to the leverage you get from trading small cap stocks. The closest possible competitor are stock options. But with penny stocks you can invest so little, however get such a possible great return in improvement.
More shares: Let’s confront it, many traders don’t have hundreds of thousands of dollars to invest in stocks. The problem with many “safe” large cap stocks is that most people are lucky if they can provide to buy 100 shares of the company. With cheap stocks, you get more bang for your buck.
The ability to build a portfolio: If you want a diversified portfolio you can invest modest amounts across varying sectors of the small cap stock market. Unless you’ve got a lot of money, that’s going to be tough to accomplish with the blue-chip stocks.
This is how the high became high: The high didn’t necessarily get high by investing in cheap stocks per say, but the concept is the same. Most high investors got that way because they took chances on up and coming companies. They didn’t buy into fortune 500 stocks after they made the list. They bought them way before that. small cap stock trading really symbolize the concept of buying low and selling high.