Do people make millions on penny stocks?
While it's theoretically possible to make millions from day trading penny stocks, it's important to understand that it's extremely risky and statistically unlikely for the vast majority of traders.
I largely agree with this idea, but there are some millionaire-maker penny stocks that are worth holding for few years. If these stocks fire, the health of the portfolio can change within a few quarters. Of course, the risk of exposure to penny stocks is always high.
Smart investments in penny stocks can lead to significant gains due to the stocks' susceptibility to rapid price movements. The volatile nature of these stocks, often driven by market sentiment and speculative trading, creates opportunities for astute investors to capitalize on short-term price spikes.
Investing $1 a day not only allows you to start taking advantage of compound interest. It also helps you to get comfortable with investing and develop the habit of putting your money to work for you. As you can see, that single dollar can make a huge difference in helping you to become more financially secure.
In any market condition, there are stocks to make you a millionaire and the names generally come from growth stocks. It's important to mention that success does not come overnight. The millionaire maker growth stocks discussed in this column are likely to deliver multibagger returns in the next five years.
| Ticker | Name |
|---|---|
| CLVR | Clever Leaves Holdings |
| LFLY | Leafly Holdings, Inc. |
| ACB | Aurora Cannabis |
| BW | Babco*ck & Wilcox Company |
Just like mid and large cap stocks, there is no limit to how high a penny stock can go. Many massive, well-established companies were once trading for less than $5 per share.
Penny stocks are a huge gamble. A casino might have better odds. Despite the short-term potential for gains, stick to a sustainably profitable approach by buying shares in proven companies with strong track records.
It is possible to make money with penny stocks. Then again, it's technically possible to make money with any type of stock. Successful investors usually focus on the potential for their stock picks, regardless of price, to gain value over the long term. There are plenty of good reasons to invest in small companies.
Some professionals recommend that you devote no more than 10% of your individual stock holdings to penny stocks. It's also important to understand your risk tolerance. Generally speaking, the higher your risk tolerance, the more equipped you are to take on the risk that can come with investing in penny stocks.
Is $100 too little to invest?
Investing just $100 a month can actually do a whole lot to help you grow rich over time. In fact, the table below shows how much your $100 monthly investment could turn into over time, assuming you earn a 10% average annual return.
Investing a measly $100 per week can turn into a nest egg topping $1.1M by retirement — but you need to start at age 25.
It may seem like $100 isn't a lot of money to invest in the stock market. But over time, you can add to that total and grow your stake in a business. Investing even a small amount is a good way to at least get your feet wet and slowly gain some exposure to a stock without going all-in right away.
Since 1926, the S&P 500 (the collection of the 500 largest profitable companies in the U.S. markets) has returned 10.2% a year, with dividends reinvested. That's a much better return than a savings account and can turn $500 per month into more than $1 million in 29 years.
In addition to Tesla, Microsoft Corp (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA) are among the top stocks hedge funds and Wall Street analysts are buying.
Creative Realities (NASDAQ:CREX) is another explosive penny stock with intriguing upside as its digital signage solutions gain traction across verticals like retail, healthcare and auto showrooms. This microcap shed 54% from July 2023 before rebounding 154% into 2024 on strengthening fundamentals.
Sure, some penny stocks turned out to be massive success stories, like Apple, Ford Motor, and Monster Beverage. Find a similar success story like those top penny stocks, and you stand to make a fortune. However, you have to be willing to do the research to find them in a sea of duds.
Although there is nothing inherently wrong with low-priced stocks, they are considered speculative, high-risk investments because they experience higher volatility and lower liquidity.
According to a study by the SEC, only about 10% of penny stocks succeed in the long term. This means that a large majority of penny stocks do not perform well and may lead to significant losses for investors.
Potential for overnight success.
Because of the extreme volatility among penny stocks, some traders are lured in by the potential to get rich quickly. On any given day, there may be dozens of penny stocks that gain more than 100% or even 1,000%, but those gains often do not last long.
Was Amazon ever a penny stock?
Some companies, such as Amazon (AMZN) originated as penny stocks but later grew into sizable blue-chip companies.
If less than 1 year of holding period, it is considered as short term. Short term gains are taxed as ordinary income and pay the regular income tax rate. Long term gains are taxed as capital gains and pay the regular income tax rate. Can you make quick money off penny stocks?
As mentioned above, trading penny stocks is risky. Many of these companies are fly-by-night and highly volatile, which puts traders in a position to lose big. However, you can still make money trading penny stocks if you trade smart and know what to look for.
- VAALCO Energy (EGY).
- Ardelyx (ARDX).
- Savara (SVRA).
- Iovance Biotherapeutics (IOVA).
- iQIYI Inc. (IQ).
(NASDAQ: AAPL). Apple wasn't always one of the largest tech companies in the world. In fact, hardly anyone knew about the company and its products for years. Back in the early 2000s, AAPL traded for under 80 cents per share — a legit penny stock.
