Investors with high-risk tolerance often choose penny stocks, which can be described as businesses that trade at a price that is less than $5. As their name suggests, they can be exchanged for less than $1, which allows investors to have thousands of shares for little sums of capital. When the price rises to levels of several dollars' investors stand to benefit enormously. However, these stocks can just as easily be wiped out. Penny stocks are typically considered highly speculative because of huge bid-ask spreads, a small market capitalization, and also the lack of liquidity. This article provides the guidelines on How to Find and Invest in Penny Stocks.
How to Find the Penny Stocks?
It's hard to find a good penny stock. Spending time studying the penny stock list and each firm may increase success. Buying a penny stock because a colleague oversold it in the car is discouraged. Now you're wondering how to research and buy penny stocks.
Many websites identify the best penny stock investments. It's important to distinguish between real penny stocks and pump-and-dump operations. Finding a site with penny stocks is a start. Wall Street Survivor's investment Ideas page lists penny stocks.
MSN Stock Screener enables you to sort equities by cost per share. Identifying solid penny stocks is critical. After browsing online listings, study each firm thoroughly. You may evaluate firms using fundamental or technique-based analysis, which is typical for penny stocks.
Selecting a Broker
When looking for a penny stock broker to perform trades, their fees require careful consideration. Brokers that charge commissions per share aren't the best choice for penny stock buyers who buy large shares. On the other hand, brokers with flat fees are more economically efficient. Take a look at this list of penny stockbrokers within the United States:
ChoiceTrade:
It is possible to trade penny stocks on the OTCBB and Pink Sheets exchanges via ChoiceTrade, which offers two alternative trading options. When trading stocks, Stock Plan A users pay a $0 fee whereas Stock Plan B users pay $5 per transaction. ChoiceTrade charges a fixed fee of $7 for any other transactions. Those who own more than 10,000 shares will pay an extra $0.0007 per share.
Charles Schwab Corp:
The normal trading accounts offered by Schwab allow for the trading of penny stock. Online trading of OTCBB and Pink Sheet stocks is possible via the Schwab website as well as its mobile app. Penny stock brokerage charges a transaction fee of $4.95.
Scottrade:
Scottrade charges $6.95 per transaction for penny stocks, which involves 0.5 percent of the trading principle if the stock is trading at or below $1 per share. Screening & research tools from Scottrade include real-time prices, complex stock screens, market news, analyst reports, and more.
TD Ameritrade:
(AMTD) Will take orders for penny stocks listed upon that OTC Bulletin Board & Pink Sheets (AMTD) Traditional equities trading accounts supplied by TD Ameritrade may be used to trade them. There is a $6.95 per transaction cost for penny stock trades.
5 Tips to Avoid Stock Scams
Pump, dump scams, and other scams involving stocks are a few of the most frequent internet-based frauds. An educated investor can recognize these frauds and avoid substantial losses. Here are five tips to stay away from scams:
Think Of It as A Fraud Until You Show That It Is Not
Suppose you find a piece of advice for penny stocks (or any other stock in general). Search for who is the person behind the recommendation. The guidance could come from employees of the business or from promoters paid who could make a profit from your investment.
Examine The Company
Take the time to study the financial reports, their prospectus, and any other documents you can find. While some details may be challenging to locate, the more information you gather, the more you know.
Seek Out the Exchange
Although some penny stocks can be found on major exchanges, such as Nasdaq and NYSE, they usually don't meet the requirements for listing. They are instead located on bulletin boards for over-the-counter companies and pink sheets, which typically involve a higher risk of exposure and risk to manipulation of prices.
Verify The Claims of Their Representatives
The promoters of penny stocks will typically declare that their company is set to announce the next massive drug, pending FDA approval or gained access to the gold brain that, once excavated, will increase the company's earnings exponentially. These claims are usually an attempt to convince investors to purchase, but be sure to get additional data to back these claims from reliable sources.
Always Be Cautious
You can't be rich quickly. If it seems too appealing to be accurate, then it is. Try digging if you find a business promising to help you find small stocks before their explosion.
Conclusion
Penny stock investing is dangerous and shouldn't be for everyone. However, those willing to accept the risk must first locate an agent, open accounts, then pay close on price fluctuations. Be careful investors who stay away from scams could be able to make significant profits shortly.
