Penny stocks, or microcap stocks are the terms investors use to describe stocks with a trading value below $5.00 a share and with market caps below $200 million. These stocks are issued by small companies, start up or growth companies, or companies with financial issues like a problem with liquidity, capitalization, debt, equity, or sales and growth challenges. The Security and Exchange Commission (SEC) does not closely regulate penny stocks, so they may be a riskier investment and prone to volatile market swings. Since these stocks are not traded on the major market exchanges like the New York Stock Exchange or the NASDQ, many investors don’t know where they can purchase penny stocks. |
If you decide that investing in penny stocks is right for you, take some time and determine your financial goals and objectives are. Do you have some extra cash available for investing, or are you taking your seed money from more traditional stocks, bonds, mutual funds and cash assets? Invest within your means and fully realize that purchasing penny stocks can be a risky investment.
Do independent and unbiased research on the company in which you want to invest. Penny stocks are among the least regulated and most manipulated stocks traded. Take some time and invest some energy into understanding the fundamental business model and basic financial information of the company before you invest your money.
Use various online resources and websites to get advice about penny stocks. Successful long-term penny stock investors have concrete rules about which stocks they will buy and which stocks they won’t. Many times, this criteria is based on revenue, the type or promotion a stock is given by various sources. Use the online chat rooms and discussion forums to ask seasoned penny stock investors about their personal red flags. You can get information about these stocks from a number of financial websites, like Google Finance, Yahoo Finance, or Bloomberg News. More detailed and in depth information about penny stocks will be available on websites dedicated to penny stock trading.
When you are ready to purchase penny stocks, open up an online brokerage account. Shop around to find the platform that meets your needs. Take fees and other incidentals into consideration when choosing your platform as they can add up quickly. When you purchase penny stocks, be sure utilize specific parameters and automated orders so you can sell the stock if and when it reaches your high or your low.
Purchasing penny stocks on-line is very similar to trading more traditional stocks on line. You have the same tools available to you, although the market may be more volatile and riskier than other stock platforms. Once you have purchased your penny stocks, pay close attention to it and monitor activity. Since investors tend to purchase penny stock at a greater volume, they are vulnerable to huge losses if the stock rapidly loses values. Of course, you are on target for big profits and gains if the stock behaves the way you have predicted.
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