Getting Started with Penny Stocks

Getting started with Penny Stocks is easier than you might think, and it can be very exciting and profitable.

Penny Stocks are a unique, short-term investment option where you can make, or lose, a lot of money quickly.

What makes them such a powerful tool for building wealth is the fact that you can buy large numbers of shares for a relatively low amount of money. Since you own a lot of shares, even a small increase in the value of a single share can add up to a major profit.

The downside here is that Penny Stocks are much less stable than traditional stocks are, so while you can make a lot of money you can also lose your investment quite easily.

What Is The Definition Of A Penny Stock?

A Penny Stock is any stock that is bought and sold at or below $5. Because of their low monetary value, Penny Stocks are not sold on the major exchanges, which means that they are not regulated.

That adds to the risk of Penny Stocks because companies are not required to release basic financial information to anyone that requests it when they are considering purchasing stock. While this can be a problem, it’s a problem that can be overcome by simply taking the time to do some research yourself rather than relying on financials provided by a company.

What Benefits Are There To Buying Penny Stocks?

Penny Stocks offer investors a way to invest in a large number of shares in a company without having to commit too much of their money.

In fact, you can often buy hundreds of shares of a Penny Stock for the same amount of money you would spend to buy three or four shares of a larger, more stable stock. Is that larger, more stable stock a safer investment? It is.

Does that safer investment offer you the same potential for profit that Penny Stocks do? No, and it’s not even close.

Owning large numbers of penny stocks is a numbers game. You aren’t waiting for your stock to double in value. What you are waiting for is a decent increase, at which point you should strongly consider selling.

Penny Stocks are not long-term investments, so when you have made a decent profit it’s best to get out and start planning for your next investment. The reason that this works go back to the number of shares that you own.

An increase of a dollar or two on a traditional stock when you only own a dozen shares won’t mean much money in your pocket. But if you see the same increase when you own hundreds of shares of a Penny Stock, then you are looking at a nice return on your money.

When Is The Best Time To Buy A Penny Stock?

Investing in any stock is risky, investing in Penny Stocks is even riskier than normal. But, you can help to minimize those risks by understanding when you should buy Penny Stocks. When a stock sells for a low dollar amount there are a number of reasons for this.

The first reason is that the stock is simply generally not that valuable. You can invest your money in Penny Stocks like this, but owning a hundred shares of stock that aren’t likely to increase in value really won’t do you a lot of good.

Another reason that the value of a particular stock could be at a low level is due to a company underperforming.

In cases such as this, you can actually make a great profit if you determine that the company in question looks like it’s going to bounce back in the near future. For example, if the company you are thinking of buying stock in had a bad quarter that should turn around because a new product is set to come out, this would be a company to strongly consider investing in.

Another time when a stock’s value might be low is during the Initial Public Offering or IPO for short.

When a stock first hits the market the company that issues it does it’s best to determine an accurate market value to sell their shares at.

Sometimes they estimate that value to be lower than expected, which presents an opportunity for investors to capitalize by purchasing more shares than they thought they would be able to afford to.

Purchasing Penny Stocks during an IPO is one of the best ways to get in on the ground floor of a company, which gives you a tremendous ability to earn a high profit. Many people have used this very tactic over the years to earn a huge return on their investment.

How Do You Buy And Sell Penny Stocks?

Penny Stocks are not listed on any of the major exchanges, so how do you even buy them in the first place? You are able to buy Penny Stocks by starting an account at a brokerage service, depositing some money, and then starting to trade.

While there are numerous available online, my personal favorite broker for PENNY stocks is zecco.com.

(You can also learn HOW to trade Penny Stocks from people like Timothy Sykes)

There’s a great video here for those wanting more info:

At any rate, There are a number of advantages of using an online brokerage service to purchase Penny Stocks.

When you go through a traditional stockbroker or investment firm to make stock purchases they are going to charge you a good amount of money for their services. While you still pay fees when you do your own trading through a brokerage service, these fees are typically substantially less than what a stockbroker would charge you.

The other main advantage of using a brokerage service to buy and sell Penny Stocks is that it gives you more control over your money. Penny Stocks are much more volatile and likely to experience huge fluctuations in value than traditional stocks are.

Modern technology lets you monitor your brokerage service from your smartphone, so when there is cause for concern you can more easily sell off Penny Stock shares.

On the other hand, if you spot an opportunity being able to make a Penny Stock purchase quickly from your smartphone without having to contact a broker will enable you to pounce on great opportunities quickly when they do arise.

Any questions? Let me know below!