The idea that you have to be wealthy in order to make money from investments such as stocks is a myth.
Many investors who have limited capital will often invest in penny stocks, or stocks priced at $5 or less a share. Another increasing trend is to invest in so-called ‘penny cryptos,’ or cryptocurrencies that are priced at equally low prices as well.
Here are the top four similarities between trading penny stocks and cryptocurrencies:
Similarity #1: Both Are Highly Speculative
First and foremost, both penny stocks and cryptocurrencies are highly speculative. The vast majority of penny stocks on the market fail over the long term, and cryptocurrencies are certainly no exception. There are over 1,000 cryptocurrencies available to purchase today, and the result is that the market is highly saturated and difficult for most coins to stand out.
Similarity #2: Both Can Be Hugely Profitable
But while the market may be highly saturated for both cryptocurrencies and penny stocks, if you invest in the right ones, both can yield very profitable results for you as well. Look at the company behind the coin or penny stock, their development team, their whitepapers, their professionalism and activity on social media, and their price history.
Similarity #3: Both Are Inherently Risky
This one shouldn’t surprise you in regards to cryptocurrencies, since the cryptocurrency market has gained a reputation for being highly volatile (and there’s no question it is).
But the reason why penny stocks are arguably riskier at times is because the lack of regulation means they are more vulnerable to scams. Cryptocurrencies are also largely unregulated, but they utilize blockchain technology, which makes all records and transactions public.
You need to understand that you’re taking a risk regardless of whether you choose to invest in penny stocks or cryptocurrencies. One way to minimize this risk will be to buy and sell them on a reputable exchange. For penny stocks, this will be the NASDAQ and NYSE; for cryptocurrencies, it will be Coinbase, Bitstamp, Bittrex, and Binance.
Similarity #4: Both Can Be Bought At Extremely Low Prices
Finally, both penny stocks and cryptocurrencies can be bought at extremely low prices, which makes them attractive to all kinds of investors. One appeal to this low price is it doesn’t take a significant increase in price for you to make huge profit.
If you buy a coin at $0.003, for example, and it rises up to just $0.03 in a few months, you will have turned a hundred dollar investment into one thousand. That’s not a huge price gain that will break the news or anything, but it is a significant profit margin, and as an investor that’s what matters.
Penny Stocks vs. Cryptocurrencies
In conclusion, both penny stocks and cryptocurrencies are viable trading options for those who have a low amount of capital with which to invest. Both are also very speculative, but nonetheless hold the potential for a big ROI.