Investing in penny stocks versus bonds

Deciding whether to invest in penny stocks versus bonds has been difficult for many CEOs and business executives.Both penny stocks and bonds carry positive and negative possibilities that make deciding which is best for any given company extremely complex.When deciding between penny stocks and bonds, it is best to investigate the pros and cons to each before reaching a decision.

Pros to Penny Stocks

Penny stocks are the stocks of very new companies that are still establishing themselves.Some of these companies grow extremely quickly and so does their stock.Investors may choose to invest in penny stocks because they are extremely inexpensive, and if the company grows quickly, the investors stand to make a lot of money when selling those stocks at a high price.The idea of buying bundles of stocks for a very low price, having them appreciate quickly, and then selling them for a high price is a very effective way to earn money off an investment quickly.

Penny Stocks Cons

Because penny stocks are the stocks of very new companies, it can be extremely difficult to predict which will grow quickly and which will fail quickly.With the stocks of mature companies it is easier to predict how a company will perform in the future because one can base predictions on past performance.However, with penny stocks there is very little to base a decision on.Investing lots of money on bundles of inexpensive stocks can result in a complete loss of investment capital.

Pros to Bonds

Bonds are basically small loans from an investor to a company.When an investor pays money to a company in the form of a bond, the investor can expect to receive a consistent payoff.The bond will return a small percentage to the investor, but the amount of risk involved is much lower than the risk involved with investing in penny stocks.Investors like bonds because they can usually invest in a mature company that is stable and has a history of earning a consistent profit.

Cons to Bonds

Investors who are looking for a quick return on their money will not be impressed with bonds.Bonds are known to be safe and stable, but low yielding.If a company is looking to gain capital quickly for an investment project, they will likely have to wait long periods of time to earn enough money for their projects solely on bonds.Whereas penny stocks may be able to provide that income in a timely manner.

Penny Stocks and Bonds

Companies that are looking to invest should consider placing their money in both penny stocks and bonds.Penny stocks have the potential to return a large percentage on a business's investment very quickly, but they also have the potential of going out of business and losing all of a business's investment in the process.By carefully investing part of their money in penny stocks, companies will maintain both the potential for high yield and still have money to place in bonds.Bonds will almost guarantee a return of some sort consistently over the term of the bond.

Depending solely on penny stock or bonds could put a business in danger or keep it from earning its full investment potential.Overall, investing in both penny stocks and bonds at the same time will give a company balance.This will keep a business earning positively in its investment and safe from losing money in large amounts.