You may have heard people say that micro cap stock trading (sometimes called penny stocks) is just trading in pump and dump stocks. Some group sends out e-mails about the next hot micro cap stock, everyone starts jumping on the stock and the price goes up. Then the pumpers start selling fast once they are in the profit zone leaving everyone else in the dust. If you listen to these “hot tips” and don’t do your homework you can surely get taken in.
Today micro cap stocks have gained in their reputation because there are now reputable people deeply researching and trading these lucrative stocks. They aren’t pumping and dumping they are trading intelligently, learning about the company and making prudent decisions. They already know there are many good reasons to trade micro cap stocks today. And, they are making millions.
Of the many reasons to trade micro cap stocks here are four to consider:
1) It’s Easier to Diversify: You’ve probably heard many financial advisors say that you should always diversify your portfolio. Well that’s fine for people with large trading accounts who have the capital to buy across many different sectors. It could take you forever to build a modest portfolio if you have only a little bit of money to invest. But if you trade modest amounts across all the many micro cap/penny stock sectors you could build a substantial portfolio very quickly. And, if you like, as your account grows substantially, and it will, you can use that money to invest in the larger blue chip stocks later on.
2) You Can Purchase More Shares: When you are buying stocks other than micro cap stocks you need a great deal of money to buy shares. If the stock price is high the small investor can buy very few shares. But with micro cap stocks you can buy many more shares of a company for very little money. When that stock rises having a large number of shares is going to make you a lot more money than only being able to buy a few shares of a large cap stock.
3) You Get Incredible Leverage: Many traders and investors sing the praises of trading options in order to give you leverage in the stock market. It is a fact; options give you great leverage. Options can rise in value very quickly and drop just as quickly just like any other stock. The basic problem with options is that they have time limitations and you can end up owning nothing if your option play drops in value and expires. But micro cap stocks don’t have that time restriction. Like options you can invest very little, actually sometimes much less than the cost of an average option, yet the potential for a great return is equal to or greater than option trading. And, you don't run out of time before the stock has a chance to grow. The leverage you get trading micro cap stocks is greater than anything else in the stock market.
4)Millionaires have been made through trading micro cap stocks: AMGEN, Inc. (AMGN), Nutri System (NTRI), Wal-Mart (WMT) were all micro cap stocks at one time. If you had invested just $1000 in any of these companies when they were micro cap stocks you would have over $4 million today! And there are many more companies trading successfully today that were also micro cap stocks. The people who were smart enough to take chances on those upstart companies aren’t worrying about the recession right now. The rich will always tell you to buy low and sell high and with micro cap stocks more than any other stock in the market you can actually do that today. With established blue-chip stocks your chances of riding the wave upwards are fairly slim. With micro cap stocks you can ride the wave up in your new yacht!
