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The most important reason to invest in penny stocks

by , 17 July 2015

The equity risk premium is one of the most important reasons why you should invest in penny stocks. If you take advantage of it, you could gain handsome rewards.

So what exactly is the equity risk premium? And why should you invest in penny stocks?

Read on to find out…


What is the equity risk premium?


The equity risk premium describes the idea that shares, including penny stocks, pay more than safer assets, such as bonds, over the long-term.

This is because stocks are riskier than bonds. And with penny stocks, the risks are even higher. This means there’s a higher chance you could lose money if you decide to invest in them, Sean Keyes in Penny Sleuth explains.

What makes stocks more risky is that their values have a tendency to bounce around a lot more than bonds or cash you have in the bank.

Stocks, like penny stocks, give you the opportunity to make money a lot faster than you can in safer investments, but as they can drop in value over the short-term, they’re more risky.

If you need access to your cash quickly, investing this money into penny stocks or any other stock isn’t a good idea. This is the risk side of the equity risk premium. The stock market compensates you for this risk with the prospect of higher returns.


Why invest in penny stocks?


The compensation from the stock market can be immense. And if you want to make more money, investing in penny stocks is one way to do it.

Of course, you can’t randomly select penny stocks to buy on the stock market. You need to uncover the best penny stocks on offer that you can leave your money to work in for the long-term.

Yes, investing in penny stocks can be risky and more so than investing in larger stocks, but the potential reward can make it all very worthwhile and profitable.

So there you have it. The most important reason to invest in penny stocks.

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The most important reason to invest in penny stocks
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