Big returns can come in small packages.
It’s why most of us are attracted to smaller-cap stocks. Unfortunately, there are also those of us that get caught up in the mistruths of small caps and miss the boat altogether.
And I can assure you, that can cost you a good deal of money
Myth No. 1 – You Need a Big Account to Trade With
If you’re planning on buying shares of Apple (AAPL) at $174 a share, you may need a big account. In fact, you may need thousands of dollars to do so.
After all, just 100 shares would set you back $17,400.
But smaller cap stocks can offer more for less. When ACADIA Pharmaceuticals (ACAD) traded at just $2 a share years ago, it cost just $200. Thanks to the opportunity behind that company, the stock is now up to $22 a share – a return of 1,000%.
You’d never see a return like that nowadays with Apple.
If you don’t have a lot of money to get started with, it’s okay. Don’t let it stop you from investing. With smaller cap stocks, you can get started with as little as $500.
Myth No. 2 – All Penny Stocks Will Generate Quick Returns
Many of us are attracted to penny stocks because we believe they’ll hand us triple digit returns overnight. The thought is, “This $1 stock could run to $5 in no time.” But that’s not often the case. Most times, it takes some patience, and a good amount of research into underlying fundamentals, including year over year revenue and EPS growth.
Myth No. 3 – You’ll Lose All Your Money Trading Penny Stocks
That’s not true at all, especially if you have a stop loss in place.
You will not lose all of your money as long as you move to minimize risk by researching everything you can about a particular stock. Granted, if you’re just buying a stock because everyone else is – without research – your risk can be greater.
When it comes to penny stocks, don’t let myths scare you away.
As long as you do your homework, and use good money management, you’ll do just fine.