Diversification is an excellent strategy for investors. One important aspect of that, risk tolerance, can be difficult to manage without knowing your preferences. Investors prefer a safe bet. They don’t want to risk losing their money on an unproven company with little evidence in its favor. That is why penny stocks often do not make it into most portfolios.

Penny stocks lack the history and information and the liquidity of more established companies, which makes them riskier to invest in than those who have been around longer, such as Apple or Amazon.

Not every penny stock is a scam or a get-rich-quick scheme. Several of them have outstanding business models and solid growth prospects.

In addition, penny stocks are a great way for investors who want the thrill and adrenaline of more volatile investments. While there is nothing wrong with investing in ETFs or other lower-risk investment vehicles, the odd penny stock can round off your portfolio very nicely.

Overall, investing in penny stocks is just like investing in any other asset class. You have to understand the business model, growth prospects, and fundamentals of the enterprise. If it looks like a good fit for your portfolio, then you can go ahead and initiate a position without hesitating too much.

  • Arcos Dorados Holdings (NYSE:ARCO)
  • Regis Corporation (NYSE:RGS)
  • Invacare (NYSE:IVC)

Penny Stocks to Buy: Arcos Dorados Holdings (ARCO)

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