Breaking into trades by making your first investments is a huge milestone. If you’re a new trader looking for opportunities, it’s important that you make wise decisions while you continue learning about how markets work, and which trades are worth making and why. Before you move forward with making investments, make sure you’ve considered all of your opportunities. Namely, you should take a closer look at penny stocks and understand why these are appealing for new and experienced investors alike.
Penny stocks are classified as shares worth less than $5 a piece, though many are valued at under a dollar — thus the name. These are good for new investors since you can purchase enough shares to have the potential for a high rate of return. Also, since you won’t need to make as large a purchase as you would on other markets, you can get started with penny stocks without having to risk your entire budget. So, you can build your portfolio while you continue learning and gaining experience as an investor.
This doesn’t mean that you shouldn’t do your due diligence before investing. Yes, these trades are affordable compared to shares from major companies, but this is because it’s often new startups without an established record that issue penny stocks. Without a documented financial history to go on, which is a major source of data for other types of investments, you need to analyze penny stock trends and look at information from other sources to inform your decisions. This process is explored in greater detail in the infographic below.