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| ASX Penny Stocks |
The stock market is not only lucrative but also a beneficial source of investment. Within it, there are various segments where you can invest your money. Penny stock is one such segment. Are you a newbie in the stock market and are confused about why you should invest in ASX Penny stocks? This blog covers the solution to your query.
Read the blog till the end to know the top 5 reasons to invest in ASX penny stocks.
What are penny stocks?
Penny stocks are low-priced shares of companies with lower market capitalizations. These stocks are traded on smaller exchanges and are issued by companies with fewer assets, small business operations, or who have been in operation for significantly less time.
The definition of a penny stock may differ from country to country. Different countries establish distinct price points below which stocks can be classified as penny stocks. For example, in Australia, stocks priced less than AU$ 1 are considered penny stocks, whereas, in the United Kingdom, stocks priced less than £1 are considered penny stocks.
Top 5 reasons to invest in ASX penny stocks
1. Penny stocks are cost-effective and affordable deal
Penny stocks are stocks that are traded at low prices. It means they are economical and you don’t have to put a large amount of money into them. By investing in penny stocks, you can acquire a significant holding with a limited budget which is usually not possible in the case of blue chip stocks.
2. Penny stocks provide sufficient diversification
Because penny stocks are affordable and can be acquired on a limited budget, it is better to consider that they offer adequate diversification to your investment portfolio. For example, if you have a budget of $1000 and intend to invest in penny stocks which usually costs around $2, you can buy its 100 stocks for only 200 dollars.
Similarly, you can invest the remaining amount in other stocks and diversify your portfolio. The benefit of portfolio diversification is that now your risk is distributed as you didn’t hold your whole amount in a single stock. It is usually not possible with blue chip stocks. And therefore, intelligent investors essentially diversify across a number of different penny stocks.
3. Penny stocks offer growth and a hefty investment
When a company is small, it has the potential to grow at the required pace. It is because a company is starting from a low base and can be moulded in any form for growth perspective, which is generally not possible in blue chip stocks.
Hence, investing in penny stocks offer desired growth and a hefty investment to your income portfolio.
4. Provides your income portfolio with the required push
Have you ever noticed that when you park your money in the bank or invest in blue chip stocks, your income becomes stagnant and does not grow for long? It is because of the little or negligible growth opportunities in the segment. Whereas in penny stocks, it is really a chance to grow well.
Therefore, it is better to invest in penny stocks if you want to give your portfolio the desired boost.
5. Penny stocks allow you to explore niche industries
Investing in penny stocks also provides the chance to know small companies, which are just starting often in various niches with distinct expertise. Because penny stocks are low-priced shares, you can actually dive deeper and explore a wide range of industries.