Penny stocks are risky investments with the potential for some serious returns. But how many penny stocks should you buy to make the most out of your investment? Read on to find out.
How Many Penny Stocks Should I Buy?
The number of penny stocks you should buy depends on several factors, including risk appetite, investment capital, and confidence in the stock’s potential.
There’s no right answer for everyone. Each person can choose whether to add these stocks to their portfolio based on their unique investment profile.
Many opt out of trading penny stocks entirely, as it requires a different skill set than most investment strategies.
Below are some rules of thumb to help you mitigate the risks involved in buying and selling penny stocks.
In addition, we will also answer a few questions that will clarify some doubts that you may have while trading penny stocks.
How Much Should You Put Into Penny Stocks?
There is no universal percentage of a portfolio that should go into penny stocks.
Because these securities can carry substantial volatility, liquidity, and fraud risks, any allocation should reflect how much you can afford to lose rather than a fixed rule.
This does not mean, however, that it’s wise to dedicate a large portion of a portfolio to penny stocks.
Many investment portfolios leave out penny stocks entirely.
Across a wide spectrum of investment choices ranging from low-risk (government bonds) to high-risk (crypto and some derivative instruments), penny stocks are near the riskiest end.
Therefore, it is possible to lose your entire investment in a bad penny stock trade.
A large loss in a speculative position can significantly damage a portfolio, so it makes sense to keep exposure within an amount you could withstand losing.
Most of us would be devastated if more than 10% of our capital gets wiped away, so I don’t advise going beyond this limit.
That’s, of course, assuming that you have the stomach to lose even that much. If not, it is safer just to watch risky assets, like cryptocurrencies and penny stocks, from the sidelines.
You won’t be alone; many people never put money into these instruments.
What Percentage of Penny Stocks Succeed?
The majority of penny stocks don’t succeed. There is no guarantee that penny stocks will grow into successful companies in the long run.
That’s not to say that penny stocks never succeed (we will cover some big ones that blew up), but as an investor, you need to understand the risks involved.
A 2016 SEC staff study of 1.8 million OTC trades made by more than 200,000 individual investors found that typical OTC investment returns were severely negative.
The study also found that OTC stocks were often illiquid, volatile, targets of alleged manipulation, and rarely grew into large companies or moved onto a major stock exchange.
However, it is also important to understand that the ultimate success of the company is not a big factor for those who invest in penny stocks.
Many people buying penny stocks are not looking for the next big Amazon or Apple anyway.
Instead, some create short-term positions and try to exit as soon as there is a significant upswing in prices.
Can You Get Rich off Penny Stocks?
You could technically get rich off penny stocks. However, it’s not a likely outcome for most people.
According to the SEC study quoted earlier, the typical individual experienced severe losses in the OTC stock market.
Penny stocks are attractive because they are volatile, and small swings in value could become huge gains in percentage terms. But that’s as much a recipe for disaster as it is for success.
That said, you can minimize the risk by following healthy investment practices.
Start by evaluating the company’s fundamentals and disclosures.
Look at factors such as revenue, cash flow, debt, share dilution, trading volume, float, and valuation metrics when they are meaningful for the company.
Study key catalysts that can create big movements in the stock price, such as favorable changes in government regulation, positive financial results, M&A buzz, and so on.
Even if you are confident that the stock’s movement can be predicted, make sure to limit exposure and exit quickly if the price starts to fall precipitously.
What Is the Most Successful Penny Stock Ever?
There is no authoritative answer to which penny stock has been the most successful ever.
Several well-known companies have traded below $5 at some point, although not all technically qualified as penny stocks under SEC rules.
Here is a list of five notable companies associated with very low share prices at some point in their histories:
- Amazon
- Ford Motor Company
- GameStop
- Advanced Micro Devices
- Plug Power
Amazon went public on the Nasdaq in 1997 at $18 per share and then completed three stock splits between 1998 and 1999.
It was therefore a low-priced stock by today’s standards after adjusting for those splits, but it was not a traditional OTC penny stock.
Amazon later completed another 20-for-1 stock split in 2022, making comparisons between its historical and current per-share prices misleading unless prices are adjusted for splits.
Ford Motors has twice gone to sub-$5 prices, once in 2008 (during the subprime crisis) and again in 2020 due to the bear market in the wake of the pandemic.
GameStop was a dramatic low-priced stock success story, climbing from low-single-digit prices in 2020 to extraordinary highs during the January 2021 meme-stock rally.
The company later completed a four-for-one stock split in 2022, so historical prices need to be compared on a split-adjusted basis.
AMD is the David to Intel’s Goliath. As recently as 2016, AMD was trading below $5. But recent increases in market share suggest it has broken out of the penny-stock category.
Plug Power is in the hydrogen fuel cell business. This is a volatile penny stock that has seen plenty of ups and downs, trading both above and below the $5 mark many times.
Is Buying Penny Stocks Worth It?
Penny stocks could be worth it if you are committed to learning how to trade them.
However, for most investors, trading penny stocks is likely not worth the trouble. Profiting from them isn’t impossible, but it requires a lot of due diligence and risk-taking abilities.
It can be challenging to invest in penny stocks because many low-priced securities trade over-the-counter rather than on major national exchanges.
However, penny stocks can also trade on major exchanges.
OTC securities can have weaker liquidity and disclosure than exchange-listed stocks, although disclosure standards vary considerably between different OTC securities and market tiers.
Major exchanges such as the NYSE impose initial and continued listing requirements covering areas such as financial strength, governance, market suitability, and timely filings, which can provide additional information for evaluating a company.
Another risk to consider is the dreaded pump-and-dump.
Some try to buy penny stocks at low prices but in big numbers, fuelling speculation that the stock is rising (this is called pumping the stock).
Then they sell the stock when the price is high (or “dump” it).
Smaller penny stock buyers often lose out in these pump-and-dump schemes because they buy when the stock is rising and end up selling when the price suddenly crashes.
This is another reason why some investors stay away from penny stocks.
Is It Difficult to Sell Penny Stocks?
It can be difficult to sell penny stocks on the OTC market, but those listed on major stock exchanges are more accessible.
Broker support for OTC securities now varies considerably. Robinhood does not support many OTC stocks, while Webull currently supports trading in more than 500 OTC securities.
Apart from this, it is important to regularly check stock volumes, bid-ask spreads, and price fluctuations when selling penny stocks.
OTC stocks can be thinly traded or illiquid, which may make it harder to sell a position quickly without affecting the execution price.
Where Can I Trade Penny Stocks?
Online trading platforms are making trading penny stocks more accessible than ever. Even better, there are tons of viable options to choose from.
Here is a list of online trading apps where you can trade in penny stocks.
- Robinhood is one of the biggest mobile trading platforms in the US. It offers many penny stocks listed on major stock exchanges such as the NYSE and Nasdaq, but it does not support many securities that trade exclusively over-the-counter.
- TradeStation offers U.S.-listed stock and ETF trading with commissions starting at $0. Still, its pricing disclosures state that exchange-listed equities executed below $1 and OTC equities can carry a $0.005-per-share commission, subject to minimum and maximum charges.
- E*TRADE offers $0 commissions for online U.S. exchange-listed stocks, but that pricing does not apply to OTC securities. Its current published pricing lists a $6.95 commission for online OTC trades, or $4.95 for customers meeting its 30-trades-per-quarter threshold.
- Charles Schwab now includes former TD Ameritrade accounts after completing the brokerage integration. Schwab supports U.S. OTC equity trading and currently lists an online commission of $6.95 for these transactions.
- Webull currently supports more than 500 OTC securities in addition to exchange-listed stocks, although its eligible OTC list can change and these securities come with trading restrictions.
These are just some of the options you can choose from to trade penny stocks. There are many more.
If you’re new to trading, compare each brokerage’s supported securities, fees, research tools, order types, and OTC restrictions before opening an account.
A broker that works well for exchange-listed penny stocks may not provide the same access to OTC securities.
Webull occupies a similar mobile-first space to Robinhood, but it now offers access to a limited selection of OTC securities in addition to exchange-listed stocks.
You could make money from buying one share of a stock, but profit potential is limited. Even if the stock grows significantly, you will get a modest profit.
For example, let’s assume that a stock priced at $1 grows to become a $100 stock. At best, you would have made $99.
Most likely, the stock would take several years to reach there, so real returns per annum would be much lower.
However, there is no requirement to buy penny stocks in large lots.
The appropriate number of shares should depend on your position size, risk tolerance, and the amount you can afford to lose rather than an arbitrary share count.
How Many Penny Stocks Are There?
There is no precise count of “penny stocks” because the term depends on price and regulatory criteria, and securities constantly move above and below the relevant thresholds.
For perspective, OTC Markets Group said its markets handled roughly 12,000 U.S. and international securities in 2025.
Not all of these securities are penny stocks.
The SEC’s older 2016 study reported approximately 10,000 OTC stocks quoted between the end of 2013 and 2015, which explains where many older estimates of “more than 10,000” came from.
Those trading in penny stocks should keep this in mind and not get drawn into risky bets just because they think that they might miss out on a profitable trade.
A lot is a number of fixed units of a security.
Traditionally, U.S. stocks have traded in round lots of 100 shares.
However, today’s Regulation NMS framework uses smaller round-lot sizes for some higher-priced NMS stocks, so a round lot is no longer always 100 shares.
Under the modern price-based framework, the designated round lot can be 100, 40, 10, or even 1 share depending on the stock’s price.
When someone buys shares in numbers other than round lots, it is called an odd lot.
Historically, brokers used to charge extra commission for processing the sale of odd lots because no one was willing to buy them.
Online brokerage and fractional-share trading have made odd-lot purchases far more practical than they once were, so buyers no longer need to structure ordinary stock purchases around 100-share blocks.
For penny stocks in particular, the number of shares is less important than the dollar amount at risk, liquidity, and the size of the position relative to your portfolio.
Final Thoughts: How Many Penny Stocks Should You Buy?
If you are buying penny stocks, there is no universal rule on how to approach them.
That said, it’s wise to keep speculative exposure small enough that losing the entire position would not materially damage your finances.
Even if a stock looks like a sure win, avoid investing a lot of money in it at once.
Exchange-listed penny stocks can offer stronger listing and disclosure requirements, but you do not need to rule out every OTC security automatically.
If you consider an OTC stock, pay close attention to its disclosures, liquidity, quotation status, and potential signs of manipulation.
Once you zero in on a penny stock, don’t buy a larger position simply because you want to make a bigger profit.
Size the position according to the amount you can afford to lose and the stock’s liquidity and volatility.
Lastly, anyone who doesn’t have the risk appetite should avoid penny stocks entirely.
History tells us that most folks do not make money from penny stock companies, despite whatever promise they might hold.
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