Entrepreneurs and small business owners always are looking for ways to increase their income. Passive income helps to keep the coffers full of funds for your projects, marketing, employee salaries and more. Finding those passive income opportunities is a challenge. You could consider investing in penny stocks as a source of passive income.
Originally, these were the stocks that sold for less than a dollar, but today, they include stocks priced at less than $5 per share. These penny stocks are generally considered volatile and aren’t traded on the major markets, but many entrepreneurs have had some success with them. Here are some reasons why it makes sense for entrepreneurs.
1- Don’t Need Much Money
If you are an entrepreneur, you have not much in extra funds to put toward stocks. Therefore, it is a good idea to go for the penny stock investment where you can get your foot in the door for as little as $500. You can invest a smaller amount of money to buy more penny stocks than if you were looking at blue-chip stocks that sell for much more per share on the major stock markets. However, you would have to pay the commissions and broker fees.
2- Buy Them Anywhere
Although many entrepreneurs are located in New York, they really are all over the country. Penny stocks allow you to be physically located outside New York to invest in them. In addition, you can trade in the morning before you leave for work or use a stock trading platform software with mobile applications to invest during your lunch hour. It’s become more convenient than ever to trade small stocks and make a profit.
3- Return on Investment is Huge
Entrepreneurs will get a huge return on their investment when they pick penny stocks. Because penny stocks are more volatile, you have the potential for some substantial losses, but the opposite is true for the same reason, you have the potential for substantial gains as well. If you play the market safely and choose a stock at a low price, you could buy thousands of shares for a small amount, and then watch it double or triple in price and sell, meaning you could see returns of 300 per cent.
4- Day Trading is an Option
Although many investors will trade penny stocks daily, you don’t have to be a day trader. If you found a stock that you believe will rise over the years, you can hold onto that stock and watch it grow. This strategy reduces the amount of money you’d spend on commissions and fees and your risk. It also gives you passive income, but you should have an exit strategy to reduce risk. Penny stocks are generally riskier because the companies that are trading over-the-counter are less reliable or at least more volatile.
5- It Gives Entrepreneurs Practice
If you are new to investing in the stock market, penny stocks give you the opportunity to practice for bigger investments. You can develop a good strategy for investing in stocks by trying these smaller stocks and keeping your losses low. You can get into penny stock trading without feeling as though you’re competing with seasoned professionals.
6- You Can Mix It
Entrepreneurs don’t want to put all their money in one basket because when they need the funds, they want them available. Penny stocks allow entrepreneurs to diversify more easily than other investments. With penny stocks, you can buy a few different stocks at once and keep an eye on them, instead of only investing in a single stock. This offers the potential for you to make more money if you sell at only a 20% or 30% increase.
7- Reality Reigns Supreme
Most entrepreneurs that invest in penny stocks are not thinking they will purchase 1,000 shares of a 50-cent stock to see it reach $10 a share. They understand reality. You might see your 50-cent stock creep to $1, which is enough to satisfy many people. With this strategy, you are likely to see a little profit every day. This is necessary if you want that passive income to occur.
For these reasons, you can try your hand at penny stock investing. It could give you the extra income to take your prototype to market.
Usman Raza is the co-founder of a Christian Social Media Agency and marketing strategist working with various brands online. Usman is the content marketing manager at an Email Marketing Agency in Los Angeles, Best PSD to WordPress, and Nano Hearing Aids. He is devoted to helping small businesses bridge success gaps by providing in-depth, actionable advice on digital marketing, SEO, and small business growth. Follow him on Twitter @usmanintrotech.