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3 Ways Inflation Affects Investing in Penny Stocks
When it comes to trading penny stocks, investors need to know everything that is going on in the stock market. Inflation is a huge factor when it comes to penny stocks, especially in recent months. When inflation rates are high, stocks become more expensive, which can have a negative impact on the stock market.
In order to make money with penny stocks, investors must be aware of the impact of inflation on the stock market so that they can make the necessary adjustments to their investment. Now, while inflation is still a factor, over the last year or so it has been dramatized due to the effects of the pandemic. And more recently, we’ve started to see some positivity regarding inflation.
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So while we are not out of the woods yet, we have seen inflation to be the main contributor to market movement over the past couple of months. As a result, equities have become more expensive, but we are seeing some relief from inflation rates.
This is good news for investors, and something to watch in the months ahead as we continue to see the effects of the pandemic play out. Given all of this, let’s take a closer look at how inflation could continue to impact penny stocks in the future.
3 Ways Inflation Could Impact Penny Stocks
- Volatility higher than usual
- Penny Stocks cheaper to buy
- Long term value
Volatility higher than usual
We all know that volatility in penny stocks and blue chips has been higher than usual over the past few months. And, when we look at the underlying reasons, inflation is one of the main drivers.
What is Inflation? It is simply a sustained increase in the price level of goods and services in an economy. And while a little inflation is actually good for stocks (it boosts corporate earnings), too much inflation can lead to problems.
Why does inflation cause more volatility in stocks? Well, when inflation is higher than expected, it can raise concerns about future economic growth. This can cause investors to sell stocks and switch to investments perceived as safer. This sale may lead to increased volatility in the stock market. Additionally, we have panic selling and buying movements, which can exacerbate the problem.
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So what can investors do to protect themselves from inflation-induced volatility? First, it is important to watch inflation data closely. If inflation is rising faster than expected, it might be time to take a closer look at your portfolio and make sure you’re not overexposed to equities.
Second, remember that stocks aren’t the only investment option out there. There are many other options, such as bonds and real estate, that can provide diversification and help protect your portfolio from inflation-induced volatility.
Penny Stocks cheaper to buy
When it comes to finding penny stocks to buy, inflation can lead to losses in the stock market. This means that many penny stocks can be purchased for less money, but may not be worth as much in terms of future earnings. Inflation can also make stocks harder to sell because their prices are lower than what they were bought for.
This can be frustrating for investors trying to make a profit in the stock market. Now, in the short term, these low values mean stocks can be a good investment. However, in the long term, it is essential to see what happens to this value and whether or not it can be sustained. So while it’s more than possible to find cheap penny stocks to buy, always remember the length of your investment goal.
Long term value
With many penny stocks trading at low prices, inflation can cause the stock to increase in value over the long term. Inflation is often seen as something that devalues money, and in a sense it is. But inflation can also have a positive effect on stocks and other investments.
For example, let’s say you buy a stock for $1 per share. Inflation rises and the following year the same stock sells for $2 a share. The purchasing power of your dollar has gone down, but the value of your stocks has doubled. In this way, inflation can create long-term value in the stock market.
Of course, inflation isn’t the only factor that affects stocks. The overall performance of the stock market is also influenced by economic conditions, corporate earnings, and many other factors. However, in the long term, inflation can have a positive effect on penny stocks if you understand where that value is.
3 Penny Stocks to Watch This Week
- Aquestive Therapeutics Inc. (NASDAQ: AQST)
- Edgio Inc. (NASDAQ: EGIO)
- Comstock Inc. (NYSE: LODE)
What Penny Stocks are you looking at right now?
If you’re looking for penny stocks to buy, there are hundreds to choose from. But how do you know which penny stocks are worth your investment? There are a few things to look for when considering penny stocks. The first thing to consider is what is your trading strategy and how to take advantage of penny stocks.
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Looking for stocks that are undervalued and likely to turn a quick profit? Or are you looking to hold your inventory for the long term? Although trading penny stocks is not easy, it can be much easier with the right information at your fingertips. Considering this, what penny stocks are you looking at right now?