Learn How to invest in Penny Stocks

Learn how to invest in penny stocks

Penny stocks are low priced stocks, generally stocks under 5 dollars. In case you’re thinking about investing in penny stocks, it’s a good idea to understand the dangers before you wager your hard earned dollars on a portfolio of stocks.

The lack of information is especially risky. Penny stocks aren’t necessarily traded on the stock exchange. They don’t need to file with the SEC, which means they aren’t publicly scrutinized. They are blind bets, or – even worse – straight out loosing bets.

On the biggest exchanges (NYSE, NASDAQ, AMEX) there are strict standards that penny stocks need to satisfy to be listed. But on smaller exchanges (like OTCBB) no such standards exist. This means that there is no added safety between the sellers and the traders.

How To Invest In Penny Stocks Open a brokerage account

If you want to invest in stocks, you need to make transactions. Penny stock brokers offer easy access to low priced stocks, with small commissions and minimal fees.

Verify that your online brokerage account gives you the data that you need about stocks, to help you settle on the best choices. The best broker for penny stocks provides charts, price histories etc. to help you in creating the portfolio most suitable for you.

Don’t believe the hype

Penny stocks have been a playground for scammers for quite a while. Don’t let the charm of fast cash make you an easy target. If you get an email suggesting a specific penny stock, check the disclaimers whether the promoters are being paid to advertise. If they are, stay away from that stock. Keep in mind: great stocks are held secret by the experts, not advertised in newsletters.

Pump-and-dump is a technique that scammers use to make easy money. They invest heavily in a microcap stock, building it up utilizing questionable business practices, and then finding buyers who are ready to buy it from them.