The Five Dollar Miracle in Stock Trading

Photo by Markus Spiske on Unsplash

The Secret of Massive Gains From Small Amounts

Though it’s easy to flip a penny, you can turn small amounts into massive gains without choosing between heads or tails. The first step is to think small and in terms of a single penny. The Security and Exchange Commission (SEC) of the United States gives you the option of buying stocks for $1 or less.

“Penny stocks” is the name given to public shares that sell at $5 or lower. Some public investors see discounts as a way of protecting their investment capital, so trading with only pennies at a time is a smart option. Sure, stocks that sell for prices under $5 are ideal for beginners, but seasoned investors with large-investment funds buy millions or billions of penny stocks at a time.

Warren Buffett—the grand-stock mogul of the 20th Century—preaches of the reliability of buying at low prices. You can only sell stock at higher prices if you first bought them at low prices. Penny stocks give investors a simple way of investing with lower costs and manageable risks.

“Flip” More Money in Less Time

It’s best to come to a clear understanding as to why penny stocks are ideal—before you invest in them.

Penny stocks work for so many investors because they present less-financial exposure. In the world of finance, if your money is exposed to 100% risk, then your money isn’t hedged. A hedge is a tool, a strategy, or an asset that protects you from losing money by minimizing the risks that money faces. Under 5 stocks are solid financial hedges.

Risk is the Brutal Reality of Investing

No financial instrument is void of risk. The inherent risks of investing, however, can be reduced with the help of price substitution. Business and economic majors understand that “the law of substitution” leads us to buy one new item instead of a past one in order to get the same results as the prior but at a lower cost.


Substitution works with penny stocks. You’re still buying actual companies that have balance sheets, innovative products, and profit potential, but you don’t have to settle with inflated costs when buying brands through penny stocks. Some of the wealthiest investors won’t even buy one share of Apple’s expensive stock, for example. Buying 1,000 shares of Apple Inc. (AAPL) requires 254,810 USD.

Many top traders are only working with $100,000 in their accounts since it’s too risky to use their total investment fund all in one trade. Penny stocks will let you buy 1,000 shares for $500 from a company stock that’s worth $0.50.

Penny Stocks Under $5—The Rules of the Game

Making the final choice to buy penny stocks is easier once you understand how they work. Start with the key points below to build your penny-stock strategy on:

  • Industry Startups—Penny stocks make scalable startup investments. Innovation enables a small company to grow by a thousand times in value once its innovation reaches its market consumer. Your profits can grow alongside small businesses if you understand real-market needs and which startups are offering solutions that appease the real interests of consumers. Prior to buying stock, determine how much each brand’s consumer has been or has yet to be reached.
  • Dividends and Steady Payouts—Many investors only put dividend-paying stocks into their holdings. Some penny stocks, just like common, expensive, stock options, pay dividends on a regular basis and within every industry. Dividends are profit payouts made to stock owners as a bonus for owning a stock.
  • Innovative Companies—No matter how you build your strategy, your highest-profiting potential comes from companies that are innovative. Measure the innovation of a company by examining its market demand. Companies are financially rewarded only when they solve society’s greatest challenges. Look for “penny-brands” that specifically work to provide answers to the public’s needs.

A Lot to Gain With Little

There’s no need to be hesitant with penny stocks. An initial investment of 100 shares could cost just one dollar. You decide on the best way to start by keeping your costs down and paying as little as you can.

At any time, penny stocks have the potential to grow 1,000 to 5,000 times the initial principal you invested. There might be something to lose, but, in the end, that amount is so small it won’t likely matter.

 

About the Author

Henrietta Newman is a self-loving single mom into smudging, nature, yoga, fitness, healthy living, tech, video games, gadgets, recipes, reviews and more.
With a love for the outdoors and visiting local attractions in and around NW PA and Lake Erie, you never know what you'll find in my nest! Subscribe to A Hen's Nest so you don't miss the fun!

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