I know most people don't think about buying penny stocks for their IRA, but I really wish more people would change their mind. I think most people believe that your IRA should only be used for buying blue-chip stocks or mutual funds that will grow your account 3-4% a year.

I suppose if you are opening up your IRA at age 50, this would probably be the wise choice. In that particular circumstance, they are too old to take the risk. However, if you are still in your 20s and opening up an IRA, then I think penny stocks are perfect for you.

Think about it. You don't need a lot of money to invest in order to build a large list of cheap stocks in your portfolio. Even if you take the biggest deduction and open up an IRA for $5000, you can still buy several different penny stocks across a wide variety of industries. That's the definition of a diversified portfolio.

If you are able to do that every single year, then your capital will start to build and you'll be branched across so many different companies an so many different sectors, that it would be considered safe investing.

Even if one of your stocks goes under, which can happen with small cap stocks, you have more than enough other diversified investments to recover from it. Let's face it, though, all you need is one of the small cap stocks in your portfolio to hit the jackpot, that you'll be retiring before you know it.