Todays Hot Penny Stock

Ever do a search on “penny stocks” at your favorite search engine? What you will find is pages and pages of results for sites that are devoted solely to penny stock investing. This shows that there is a powerful demand from investors for this type of investment.

It is also pretty clear, if you watch or read the popular media, that penny stocks are not considered prime investment vehicles. They would much prefer to cover more popular stocks, funds and big-name investors. That is fair enough, but there must be a reason for the high level of interest in penny stocks.

The draw for many investors is the huge profit potential in penny stocks. They are very volatile compared to larger issues, meaning that their price will fluctuate by a large amount on a percentage basis. So there is the potential to ride a penny stock up 100% or more in a short period of time, days or weeks.

So if there is such a huge profit potential, why aren’t traditional investors buying penny stocks? For the sake of an example, let’s use Warren Buffet as our traditional investor. If Warren Buffet is not buying penny stocks, then why is it a good idea for me or you?

Here are some ways to answer those questions:

1. Mr. Buffet has more money to invest than you do

He is investing so much money that he doesn’t need to accept the higher risk associated with penny stocks. Buy you and I can accept those risks because we are only investing a little at a time. And for it to be worth our time, the stock must have the potential to make a big profit.

If you invest $250 in a stock, it is not worth your time or effort to net a 10% gain after one year. That is $25 and that may buy you lunch. Big deal. But if you got pretty good at penny stock investing and could double that initial investment, that is more worthwhile.

2. You and Mr. Buffet have different investing time frames

Mr. Buffet is growing his portfolio of investments over time. He is in it for the long haul, for years and decades. But I want to take my $250 and see if I can turn it into $500. And for it to be worth my while, I need to see those results in a month, maybe two. And I know that if I can double my initial investment, then I can do it again.

Penny stocks are great for certain people with the right goals. An inexperienced investor can’t invest huge amounts at a time because there is a risk of a loss. But if you are willing to put up a few hundred - or whatever the right amount is for you - penny stock investing is a great way to grow your investment in ways that more traditional investing just can’t match.