What Is A Penny Stock | Best Damn Penny Stocks

What are penny stocks?

Jun 5, 2012

What are penny stocks? The Securities and Exchange Commission (SEC) defines penny stocks as any stocks currently trading for less than five dollars; many trade for one dollar or even less. Given their low value, it is no wonder that many beginning investors are unaware that these stocks even exist. For a crafty and well-informed investor, though, penny stocks can be a great way to make money without taking on much risk.

How can I start investing in penny stocks?

To invest in penny stocks, you need to choose a stockbroker who is willing to help you with those investments. Many brokers charge additional fees for low-value stocks; they want to push clients towards higher-value stocks in order to increase their own commissions. Find a broker who allows you to do what you will with your money even if it means investing in penny stocks.

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Next, you will need some background knowledge to guide you through the investment process. Penny stocks are fundamentally no different from higher-value stocks, so seek out a general guide on buying and selling in the stock market. You don't need to be an expert, but you do need to have some basic investment knowledge.

Remember, investing in the stock market is a business. As you would handle any other business opportunity, create a plan before you start investing. When you actually get into the market, stick to the plan! Otherwise, you risk being trapped by emotional swings and reckless decisions.

Which penny stocks are the best choices?

Contrary to popular belief, many penny stocks are listed on the NYSE, AMEX, NASDAQ and other major exchanges. When they choose which companies' stocks to list, these exchanges make sure the companies meet certain financial criteria. If you invest in listed penny stocks, you can be sure you are investing in financially sound companies. Conversely, if you invest in unlisted stocks, you may be taking on added risk.

Look for companies that have found niches to exploit. The most successful small businesses usually have a great story or a unique product. Invest in companies that are poised to break out.

Relying on tips from outside sources is fine, but beware of price manipulation. Never make an investment based on just one tip! Verify and corroborate every piece of advice you receive, and you will do well in the market.

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