Using Penny Stocks to Make Money

| April 7, 2012 | 0 Comments

The stock market is a great way to beat inflation. Inflation is the reason that keeping money under a mattress is a poor way to save. Assuming this is a safe place to keep money (which it actually isn’t), the real problem with storing money in a non-interest bearing vehicle is that it doesn’t just not gain value; it loses value. One hundred dollars in 2000 would only be worth $78.40 in 2010. If your money was under a mattress that whole time, you lost over $20, even though nothing was technically stolen.

Because the stock market generally increases in value at an average rate faster than that of inflation, putting money there is a good way to ensure that it will be worth the same amount down the road when you want to spend it (assuming the road is long enough). However, some people are interested in using the stock market not simply as a way to preserve wealth, but to increase it significantly.

Ways to leverage the stock market for higher short-term gains include short selling stocks, options trading and taking advantage of highly volatile securities such as penny stocks.

While volatility is often seen as a bad thing for investors, particularly those who subscribe to the buy-and-hold strategy, it can greatly benefit short-term investors. Knowing which penny stock to buy in this case is more a matter of determining which penny stock is likely to continue on a wild cycle of ups and downs. Many hedge fund managers make their money in penny stocks, not by riding up the next Apple or Sony, but by buying low, short-selling high and influencing when these peaks and valleys occur by buying into a significant share of the (very small) market.

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Category: Penny Stock Tips

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