Sometimes big things come in small packages.
It’s why penny stocks and small caps are so attractive. Unfortunately, there are also those of us that get caught up in the myths of small caps and miss the boat altogether.
Some of those myths include:
Myth No. 1 – You Need a Big Account to Trade With
If you’re planning on buying shares of Apple (AAPL) at $170 a share, you may need a big account. In fact, you may need thousands of dollars to do so.
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%.
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 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.