In 2021, we are living firmly in the digital age, and it’s becoming increasingly impossible to imagine our lives without the internet. From banking and finance to connecting with family and friends, there are few things we don’t rely on connectivity for, and as we do more and share more online, the need for robust cybersecurity to protect our personal information and sensitive data is at an all-time high.
According to a recent survey by Statista, spending in the cybersecurity sector exceeded $40.8 billion in 2019, and is predicted to reach $54 billion by the end of this year. The findings of Statista’s survey were, for some, something of a wake-up call, highlighting the growing threat of cyber-attacks we could be facing year on year as a result of the increasing digitalisation of human activities – and savvy investors are turning their attention towards the growing market of cybersecurity products and services as an opportunity to make long-term profit as a result.
Cybersecurity penny stocks are among the most popular vehicles to invest in this sector, with a range of promising small companies in this industry beginning to garner interest. So, should you invest in penny stocks to take advantage of the cybersecurity industry?
Cybersecurity penny stocks – Do they fit your investment strategy?
Before you consider adding penny stocks to your investment portfolio, it’s important to understand what they are, and what advantages and risks they could bring to your investment portfolio.
Penny stocks, also called microcap stocks, are small companies whose share price doesn’t trade above £5. These companies are usually exchanged on unregulated markets, like the OTC (over-the-counter) market, but it’s also possible to trade some penny stocks on large and popular exchanges like the NASDAQ, AMEX, and NYSE.
As penny stocks have a low share price, they’re ideal for traders and investors with limited budgets or who have a small amount of initial capital. In addition, these stocks can be quite volatile, which means that if you’re an aggressive trader, you can take advantage of the price swings to make a profit. Some penny stock growth is also underestimated by the market, which means they could well be tomorrow’s big winners, allowing early investors to make a lot of money, just as Bitcoin did back in 2010.
Nonetheless, penny stocks are also risky assets that do not fit all investor profiles. Because they’re mostly small and young companies traded on unregulated markets, it can prove difficult to find public information about their history, growth prospects or the way they are managed. They are also more volatile stocks than traditional stocks – something that despite being an advantage for those who manage their levels of risk well, can also be dangerous due to sudden price movements that can swing against investors.
Penny stocks do not usually have a lot of trading volume, which means that they are not really liquid. Because of this lack of liquidity, you might find it difficult to buy or sell penny stocks when you want and at the price you’re looking for, which can be off-putting for those who like to trade with the flexibility to make a quick sale. But even so, they are becoming an increasingly popular addition to investor portfolios in 2021, and it isn’t difficult to see why.
The bottom line
The cybersecurity sector is a growing one, and it has the potential to offer great trading and investment opportunities to those who aren’t afraid to hedge their bets. Cybercrime costs the global economy more and more money and affects more and more people every year, so there is no question that the need for it will continue to grow – and if you’re looking for a new and unique way to diversify your portfolio in 2021, then this might just be it.
Armed with the basic knowledge you need to make a decision, all that’s left to do is determine if cybersecurity penny stocks fit in with your trading or investment style, which will depend on which kind of investor you are. If you’re not averse to risk and have money you can afford to lose, then it’s a good tip to try out – and could potentially bring you some substantial gains long-term.
Disclaimer: Investing money carries risk, do so at your own risk and we advise people to never invest more money than they can afford to lose and to seek professional advice before doing so.