If, like many fellow Australians, you're up for a punt, then it may be worth considering speculating on the sharemarket. There are plenty of speculative stocks, sometimes called penny stocks, for you to choose from. But, of course, choosing the right ones is quite tricky because there is not a lot of independent research into smaller companies listed on the ASX.
Indeed, many of today's blue-chip shares (stocks that are well known, high quality and often market leaders in their industry) started life as micro-cap stocks. For example, Altium (ASX: ALU) was a penny stock less than a decade ago and now has a market capitalisation of $4.9 billion, points out The Motley Fool (fool.com.au), provider of investment guidance, both free and premium, to investors worldwide.
But beware: not all penny stocks become blue chips!
Penny stocks usually trade for less than $1 and sometimes for only a few cents. Typically, they are young, micro-cap companies (below $5 million) that don't pay a dividend. Their price is usually more volatile than for larger, more established companies.
These stocks can seem like a bargain, but whether they are or not depends less on their share price and more on their fundamentals. Their potential to grow and generate profits is the most important consideration.
The low cost of penny stocks can lead investors to believe they have the potential for exponential growth, but trading them can be risky with a high potential for loss and even fraud, says The Motley Fool.
This doesn't mean you shouldn't consider them, because they can achieve strong returns. Early investors in small, fast growing companies can capture substantial gains compared to later investors who wait until those companies have grown, points out The Motley Fool.
This story is from the February 2023 edition of Money Magazine Australia.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the February 2023 edition of Money Magazine Australia.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
Is the public market shrinking?
Australia needs a healthy stock market to give companies access to funds and to allow retail investors to build wealth.
India: three steps to transformation
Massive investment and extensive reforms turbocharge the economy.
The ballet of business
Changing direction, products, models and marketing is a hard task for a business. We chart what it takes to turn a business around, plus profile four successful pivots.
Save money and the planet
Could the high cost of living give us the incentive we need to reduce how much water and energy we use or waste? These eco-friendly household tips will help you do just that.
AI adoption is the new black
Artificial intelligence is set to reshape the commercial world, and small enterprises can’t afford to miss the boat.
Spam attack! Murky laws jam our inboxes
Unwanted marketing material is one of the pain points of modern life.
From rags to riches in style
Rich Tran sported a bowl cut until he was 14 years old and had no intention of becoming a hairdresser.
New work deals are killing the 'old' office
The Covid pandemic and the subsequent lockdowns accelerated the trend to more people working from home. It was a mixed experience.
Points taken: the truth about rewards
Can hopping between credit cards really boost your frequent flyer haul and give you cheap or free travel - or is it doing more harm than good behind the scenes? Money puts it to the test.
Shortcuts to own a home
Innovative ideas with a focus on low costs and sustainability could help solve the housing crunch.