If you never enjoyed roller coasters or riding in elevators, then investing in penny stocks may not be your thing. There are a lot of ups and downs, but people still try their luck. They cannot help it because people are fascinated about buying stock priced at pennies a share and turning around to sell them for dollars per share – a rare occurrence, but possible.
Go Slowly When Starting Out
Ready to get involved in penny stock trading? Then here are some things to think about before making your first buy.
- Open an account with a reputable online brokerage, looking for trading tools like interactive charts for technical analysis, research reports, and stock screeners that allow you to select stocks with certain characteristics.
- Make sure you understand what kinds of online tools are available, especially ones you can access for free. One piece of penny stock advice we like to share is learn the ropes through other markets first. We are not advocating you start off by purchasing shares that go for $100 a pop, but rather understand the principals involved with larger, regulated markets first. These principals apply to penny stocks, and more information is available.
- Stay away from water cooler investors offering advice on hot penny stocks. If someone is promoting a stock they have made a lot of money on, then a price correction is just around the corner – which could happen fast and hit you right in the wallet. Watch out for penny stock traders constantly yammering about their stocks, preaching about what a hot stock it is.
- What are your objectives? Are you just trying to have fun with some extra cash, or do you want to make certain returns in a certain time frame? Set goals, otherwise you will never get there. And put them in writing.
- Look for self-regulated organizations that offer disclosure of quarterly financials, annual reports, company news, and other helpful information.
- Set as limit on much money you can afford to lose, then open an account with a reputable brokerage firm – but resist the temptation to add even a penny more. Always remember that it is your money and future – not someone else’s.
- Decide the type of penny stocks you are most interested in, and understand the different markets. They key things to zero in on are regulations and reporting requirements, the price range of shares you are interested in, the industry groups you like such as biotech, technology, resources, transportation, or something else, and any other parameters that you feel are significant.
Finally, focus on earnings, analyst upgrades and hard numbers. Forget about the buzz, hype, or announcements by water cooler savants. Our recommendation is that you focus on hard data -- sales numbers, expert analyst upgrades and downgrades and other hard figures that put the strengths and weaknesses of a penny stock in perspective. If you are not willing to lose, then invest your money elsewhere.
At Money Runners we pride ourselves in sticking to this same advice and we pass our picks on to you for free. So sign up to our newsletter now to get them delivered real-time to you inbox.