With all of the volatility in the stock markets these days many investors are wondering just why they are investing in the stock market in the first place. Penny stocks are a land of true volatility, but when the entire market is reacting the same way is it time for you to consider an investment in small cap stocks?

If you are one of those concerned investors that is worried about the fluctuations in your portfolio? If yes, then you probably can’t handle the wild rides of penny stock investing.

Still reading? Then you must have an iron stomach and are able to weather the significant ups and downs of the stock market. The “great recession” has really separated those with deep commitments in the markets from those who were just the hopers of investing. The interesting thing to take from all of this is the fact that normal blue chip companies were experiencing the same type of volatility swings that are often present in small cap stocks.

Does Volatility Get You Excited?
Here’s a math equation that I believe is true: Volatility = Opportunity. Very simple one to understand too! Where there are large fluctuations in stock prices there is money to be made if you can game it successfully.

Since the stock market prices of 2010 have been quite volatile and you’ve been able to seize on the opportunities therein, it could be time for you to consider small cap stocks as a part of your investment portfolio. Always with an eye to your asset allocation, penny stocks should never make up the majority of your stock portfolio, but if you can handle volatility then these company with small share prices are able to have big price swings.

Always talk to your financial advisor before any investment decision and they will help you figure out the level of risk that would be appropriate for your situation. Investing in penny stocks can be profitable but takes a lot of research and can sometimes require acting fast but can be very rewarding when you can see such large swings in price.

photo credit: David Paul Ohmer

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