Penny Stock Advantages and Why Avoid the Big Boards

Penny stocks have built in advantages that other stocks do not. While there are many voices out there, some individuals may argue that only professionals should be investing in stocks. This simply is not true. In today’s information age, there is an equal, or almost equal, amount of information on any given stock in the market. Absolutely, there are risks to penny stocks, but these risks are no greater than the risk with any stock listed on exchanges.
With penny stocks, an individual investor can invest in far more shares than he or she might be able to than with standard stocks. Therefore, buying a million shares of a penny stock may yield a far greater return than buying a few hundred shares of a standard stock. Further, the loss suffered with the purchase of a common stock or preferred stock can be equal or greater than any possible smaller amount purchased of a penny stock.
Penny stocks also have the potential to increase exponentially by 50% to 100% – or even greater – on a given day. Standard stocks rarely, if ever, have the potential to increase this significantly on a regular trading day. This means that returns on standard stocks are much slower.
Cost is another factor. The cost of standard stocks, when factoring in broker fees, can mean that returns are far less attractive. Brokers also often tend to try to corral buyers into buying standard stocks on margin. In other words, many predatory brokers want their customers to borrow money to buy stocks that may see significant loss.
In many cases, companies will issue multiple stock classes.  This means that investors who think they may be gaining some control over a company by purchasing standard stocks often find that when a significant company event occurs, the individual investor has fewer voting rights and lower access to trading volumes than anticipated.  And common stock holders are last in line when it comes to creditors receiving payments should a bankruptcy occur.
Given the lower cost of penny stocks and the potentiality for a rise in a value with in a matter of hours, the individual investor can see returns much sooner than days, weeks, or even the months it might take with standard stocks.
Many penny stocks, despite what the institutional investors argue, have strong fundamentals and compelling return ratios. For the single individual investor who does not have vast sums of money to invest, this can be an advantage.
Other advantages of penny stocks include: attractive value at current buy price, competitive advantages over other companies in the same sector, high barriers to entry in a particular sector, strong management teams and increasing company revenues.
Many penny stock companies also hold patents on new technology that can lead to gaining an early foothold in the market. This can translate to growing market share or little competition for a specific technology. Penny stocks often rise because of increasing revenue as, in many cases, the stock trades in a far less saturated market. And contrary to what some might say, the decreasing or minimal debt held by penny stock companies means that risk can be less with penny stocks than with many standard stocks.
Penny stocks can be volatile – but so too can the standard stock markets. While investors in standard stocks may spend many sleepless nights worrying about their ventures, individual investors may find it easier to sleep at night when considering there is potential for greater gain and virtually no risk of high margin costs attached to any single investment with penny stocks.