Penny stocks are often seen as risky or without lucrative profit. Small investments could fluctuate, but do they ever result in anything life-changing? Whether you’re a stock market beginner or you want to expand your portfolio, you’ll enjoy the interesting results from trading penny stocks that we’ve come across in researching this article.
Penny stocks can become dollar or regular stocks, but it’s uncommon. That being said, as penny stock companies mature, the value of their shares may see considerable gains. People have rarely become millionaires trading penny stocks, but one can make sizable profits trading them.
Throughout this article, you’ll also learn the following info about penny stocks turning into dollar stocks:
- Whether or not it’s possible or common
- How you can spot a penny stock that might turn into a regular stock
- Tips to start investing in high-potential penny stocks
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
Can Penny Stocks Become Regular Stocks?
If you’re thinking about investing in penny stocks, there are a few crucial things that you should know. To the broader trading community, these stocks don’t prove out to be the most profitable ones. Nor should you expect to make your money back quickly. However, there’s a potential for any penny stock to become a regular stop eventually. Let’s examine a few notable suggestions on this subject below.
- If the company rapidly expands, there’s a chance for their stocks to change. Penny stocks are a portion of a company; if the company grows, so do your shares. Small, brand-new companies have much more growth potential, so it’s good to keep an eye on them while they’re starting.
- Merging companies typically grow their shares. If two small companies become one, they’re likely going to grow their penny stocks. In some cases, the numbers could turn into dollar stocks overnight. It’s worth watching the news about your favorite penny stocks to find out if they’re merging any time soon.
- If enough people invest in the market, a penny stock can become a dollar stock. Investors directly influence the market. When there are more investors, the price per share increases, it becomes more valuable, which has the chance to break out of the penny stock category.
- It’s relatively uncommon for the transition to happen. It’s crucial to remember that, while it’s possible, it’s not probable. Most penny stocks stay in their lane for years or decades, making them a bit risky for investors. If you want to grow your portfolio’s worth, they’re not the best choice. However, there are circumstances where that’s untrue.
- Penny stocks are notorious for wild fluctuations. PocketSense explains that some companies have dropped to below 25 cents, then back up to $20 or more. This fluctuation typically stems from market crashes, poor company decisions, or drastic loss/gain of investors.
As you can see, it’s not impossible for penny stocks to make you loads of money. If you were in the group of investors that spend 11 cents per share and skyrocketed to over $20 per share back in the early 2000s, you would’ve made a lot of money. To discover how you can review the potential of a penny stock, read on.
How To Identify High-Potential Penny Stocks?
If you’re prepared to put the risk in the past and invest in penny stocks, you’ve come to the right place. We’re about to cover everything you need to know to identify penny stocks with the best possible results to boost your net worth and ride the wave.
Here’s the five-step process to know when a penny stock has a lot of potential:
- Watch the company’s history and identify notable aspects. If the company manages to raise over $1 to $5 per share but drops back repeatedly, it’s not a good sign. This pattern proves that they can’t get over the financial hump to move into regular stock. Also, review their moves (mergers, bankruptcy, etc.).
- Check if there are any patterns of the penny stocks. Does the company keep going up and down? Do they break previous records weekly? Is it remaining about the same? These questions will help you determine if they’re worth investing your hard-earned money. Patterns are the most useful tool in the stock market.
- Figure out how the whole stock market is doing compared to the specific penny stock. If your chosen penny stock dips, but the whole market does, too, it’s not the company’s fault. On the other hand, if they’re losing shares and value while everything else is growing, there’s a good reason not to invest.
- Identify signs of consistent growth. Investopedia recommends keeping a watch on continuous growth patterns. If the penny stock grows every week and overlaps previous highs, then they’re probably worth investing in. If they’re always breaking record lows, stay away from them. You can view patterns and records by typing their ticker symbol into Google or another search engine.
- Learn more about the company’s daily actions. If they’re always in the news, there’s a chance that other investors will be interested. As you read earlier in the article, interest and loads of investors are what drives up a stock’s price. With enough momentum, a penny stock can become a regular stock.
Following this process is an excellent way to spot high-potential penny stocks. If you’re on the fence or you’re a bit too concerned, set a small budget. How much are you willing to lose? If you’re okay with losing $50, then invest it and act like you won’t get it back. If it raises, you’ve made a significant profit; if not, you’re not left in financial ruin.
When Should You Invest in Them?
If you’ve found the perfect penny stock that checks all the boxes, there are three crucial questions to ask yourself:
Was There a Recent Market Crash?
It’s no secret that almost all stocks dip when there’s a market crash. If you find a company that was a regular stock and dipped down into the penny stock range, there’s a chance that it might go back up when the market corrects itself. If you find these hidden gems, you should invest in them to see if you could profit.
Is the Company Growing or Merging?
If two successful companies merge, then they’re worth the investment. They’ll typically raise quite a bit by doubling or tripling their value to their customers. You’ll reap the benefits of the merger without having to worry about it dipping. However, there have been times when merging has dipped a stock’s value because it was a poor decision.
Are There Political Changes on the Way?
Politics affect the stock market more than most financial aspects. For example, if the House, Senate, and President are all one-sided, the stock market fluctuates wildly. This situation occurs because the winning side is free to pass influential bills that could cause significant changes, which the stock market doesn’t feel comfortable or stable about.
Investing in penny stocks is fun if you’re willing to take the risk with small amounts of money. Don’t bet your house on it, but a few dollars here and there can make a noticeable difference.
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Conclusion
Now that you know how to watch the market for penny stocks that might become regular stocks, you could make a decent income. Keep in mind that the stock market changes, which means it’s unpredictable. Even if you think you’ve found a gold mine, start with small investments to prevent yourself from losing too much money.
Here’s a quick recap of the post:
- All penny stocks have the potential to become dollar stocks, but it’s rare.
- Wise monitoring is crucial to prevent financial losses in a risky market.
- Make sure that the shares are continually rising before investing.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
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