If you are already comfortable investing in regular stocks you’ll most likely love it when you start to buy penny stock. You’ve probably already enjoyed the long term added returns to your portfolio that can only come from investing in growth stocks and if you’ve done the math and you can easily see how much more you’re making versus just sticking the money in a bank account. That same “boost” to your investments can be rediscovered when you begin to purchase penny stocks.
Penny stock pink sheets add a diversified, non correlated, highly volatile component to your returns. If you buy penny stock with short stop losses, but allow your winners to compound they could add an extra couple of percent to your annual returns over the long haul. You remember what a couple of percent did from bonds to stocks over your working career? This could mean tens or hundreds of thousands of dollars extra in your retirement.
Another option if you’re looking for a career is to a take a percentage of your retirement and become a penny stock trader. I recommend that you trade on paper for awhile until you get a strategy that works for you. Then never risk more than 2% of your trading account on any trade and that includes the fees. So if you have $50,000 dollars to trade and you want to buy the stock at $2.16 a share with a stop loss of $2.00 with a fee of $7 for each trade this is how you figure out how much you can risk. 2% of $50,000 = $1,000. $1,000 – $14 (buy and sell fee) = $986. $986 / 0.16 (difference of stock price and stop loss) = 6162 shares of stock. 6162 shares of stock costs $13,310 which is the maximum you should invest on one trade. Just apply this math to every time you buy penny stocks adjusting your risk levels for your comfort.