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Why Buy Penny Stocks

It doesn’t take a lot of money to make money.  But this investment strategy is not for everyone. Should I buy penny stocks?  Is investing in penny stocks for me?  To adequately answer these questions for yourself, you need to perform due diligence and learn as much as you can about the penny stock market to make an informed decision.  Thanks to the Internet, online research is readily available and accessible so you can determine whether buying penny stocks is a suitable investment tactic for you.

Definitions vary but the Securities & Exchange Commission (SEC) defines any stock under $5 as a penny stock.  Penny stocks may trade on the NASDAQ Small Cap, AMEX, Pink Sheets or over-the-counter-bulletin-board (OTCBB).  You can choose to purchase penny stocks engaged in a variety of industries.  For example, there are oil penny stocks, gold penny stocks, and alternative energy penny stocks. 

Should I Buy Penny Stocks?

Different people get involved in the penny stock market for different reasons.  Novice investors may see the low share prices as an easy way to ease into learning the ropes of investing.  Advance traders may trade penny stocks to hedge a position.  Many people are drawn to this speculative investment as a means to get rich (preferably quickly).

There is an element of risk in all investing ventures but it’s common knowledge that penny stocks are particularly riskier than regular stocks.  Penny share prices are notoriously volatile and unpredictable, which makes for huge gains or losses depending on the price you had bought them at.  Penny stock risk factors could include lack of sufficient information available, no minimum reporting standards, lack of company history or track record, and low liquidity.  As such, fraudsters like the penny stock market.  However, there are quality penny stock companies with solid fundamentals out there and there are investors whom have made significant profits trading penny stocks.  Investors are also enticed by the low share price and hence, lower capital required to participate in this market.  Ultimately, if you know what you’re doing and learn how to spot a good penny stock, there is potential to make a lot of money in these investment opportunities.  On the other hand, if you are naïve and jump into the market without understanding what you are getting yourself into, you will likely incur losses quickly.  Do your homework and learn from your mistakes.

Where To Buy Penny Stocks?

You’ve decided that you have the stomach to handle the inherent risks and potential high rewards of investing in penny stocks.  Now where to buy penny stocks? Read this blog post about penny stock brokers - ... These stocks may trade on the NASDAQ Small Cap, AMEX, Pink Sheets, or OTCBB.  Canadian penny stocks trade on the TSX or TSXV.

Before you can execute buy or sell orders, you need to set up an account with a broker. The top rated Penny stock brokers function as agents to complete your trade instructions.  Typically, investors with trading experience do their own trades online and those without rely on a stock broker for guidance.  If you are computer literate and internet savvy, you may be inclined to do your own company research and invest online to keep fees down.  But it will require a lot of energy and commitment on your part.  You may consider the services of a professional stock picking company.  It would be prudent to ensure the company is reputable.  Don’t blindly follow their hot penny stock picks – do your own research as well.  Alternatively, enlisting the help of a stock broker will be more costly but in return, you have an experienced professional guiding you on your investment choices. 

Mastering the technique to buy penny stocks and sell at the right price will reward you with desired profits.  Not understanding how the game is played in the penny stock market will wipe you out fast.  Equip yourself with the basics of fundamental and technical analysis tools.  The downside of this investment vehicle is that you can lose everything you’ve invested.  The upside, however, is limitless potential to amass explosive gains.  The decision to buy or not to buy begins with extensive online research and an awareness of your risk tolerance.

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Contact:Timothy Kesier


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