Penny Stock Tips to Help You Make Money

Penny Stocks And The Market

Everyone's heard a story about someone who made their fortune by trading penny stocks. These stories can make it seem easy to make loads of money by investing in small caps. It can be easy in certain ways, but it's not entirely simple. Here's some basic information about investing in penny stocks.

Penny stocks are named because they once cost a penny. That's not true anymore, but this type of stock has been a part of American markets since the 19th century. You can make a lot of money on these kinds of investments, but you'll also be putting more at risk. That leads to a large loss potential that you need to pay attention to.

Penny stocks is a term used to refer to stocks traded outside the major exchanges, and it's not always a complimentary term. Major exchanges are NASDAQ, NYSE and AMEX. Penny stocks may also be used to refer to nano caps and small caps, but share price is what should really be used to determine whether or not something is truly a penny stock.

If you're thinking about investing in this kind of opportunity, you need to think hard about how much risk you want to put your portfolio into. A common suggestion is to start with no more than ten percent of your entire portfolio in this kind of investment. Remember - the greater your risk, the higher potential for reward, but also the bigger the loss if you fail.

Step one is finding out as much as you can about penny stocks. Some people have been able to earn fast, with minimal exploration. We call these people "lucky". You shouldn't expect to follow in their footsteps any more than you should expect to win the lottery on your first ticket. Investors who don't do their homework lose more often than they win.

Make sure you're dealing with a broker who knows how to deal with penny stocks. You need to research your broker, too. If you find one who tells you that you've got a sure thing, find another broker. There's no such thing, even if the odds look very good. Online subscription services are another option, but they can't give you the kind of advice that a broker can, so approach them with care.

Get familiar with the companies offering stocks you're interested in. Unless you feel like riding the tide of popularity and watching the ticker at every moment, you'll be looking for a longer term strategy. That means finding a company with a good record, strong leadership, a well thought out business plan and a product or service that has a real future. If you don't feel right about the company, don't invest.

Remember that penny stocks aren't traded on a stock exchange. They're done in a manner called over the counter. Brokers get a commission on your transaction. Penny stocks that are still listed on NASDAQ are a good bet, since they can help you find out more about the company. When a stock is suddenly delisted and begins being traded OTC, you know there's trouble at the company.

All these cautions aside, if you know what you're doing, penny stocks can be a really useful choice. People who know their stuff and stick to a good plan can make a lot of money with them.

Article Source