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Beginner Guides and Benefits of Investing in Penny Stocks

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By Chris Borg


If you would like to get into the stock market but are hardly wealthy or even particularly solvent at this time, consider penny stocks. No, they do not necessarily cost pennies, but they can. They are cheap.

They were indeed, once selling for pennies but the SEC and the financial service industry now deems those up to five dollars as penny stock. Here is where you can get your feet wet without winning the lottery. Begin researching small companies under the radar. This is where you can earn money as they grow. Also look for previously good companies fallen on hard times. Chances are they will recover with restructuring and fresh cash outlays. The auto companies are a good example.

To begin, you need to set up an account with a brokerage firm. This allows you to buy and sell stocks. If you are new at this, they will teach you the ropes. They make a fee each time you buy or sell so they want your business. They are not there, however, to pick your stocks. You will have to do your due diligence.

Before investing, follow a few companies for a month. See if you can predict where they will go. Watch the market to learn how savvy you are when it comes to picking. Try out one of the online virtual stock sites. You set up an imaginary account and practice buying and selling. It is fun and a real learning experience without risk.

With penny stocks, the risk often has to do with lack of transparency. It can be tough to find out the bottom line on small or sensitive companies but not impossible. If the company is too obscure, maybe you should avoid it. You have to ask yourself what it is hiding.

You can contact a company for stock information. Many have customer service representatives for this purpose. One good way to invest is to buy what you know. Pick companies that offer products or services you are familiar with whether it be software, fashion or soft drinks. What you know will keep you interested and a chance to flex skills you may already have.

Do not go in completely alone. There are many penny stock newsletters that will keep you up to speed on where things stand. Subscribe to one or more of them. Online, you will find links to numerous research sites. Stay alert to the business news and any tips concerning your area of investment. Information, heard just about anywhere, can be of importance. Train your mind to look at the big picture and current trends.

As a rule, stay with the big stock exchanges. And learn how to read symbols and signs. Certain letters mean bankruptcy. Find out what that means and how it effects the future. Read financial journals daily and it would not hurt to tune into TV commentary either. PBS has a good nightly program.

There are stocks trading on what is referred to as a Pink Sheet. Tread lightly. It usually means stocks trading for pennies or fractions of pennies. Do your research if this is where you want to go. Some companies are small or very new. That does not mean they will not grow. Do your analysis and be confident in your judgment. Learn all you can about penny stocks before you invest. Then go for it. In time, if you are a savvy, and determined investor, you will be playing in the bigger field.




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