Important Things to Consider When Buying Penny Stocks

On December 2, 2010, In investment

If you are a newbie to the business of buying penny stocks, you need to follow some simple and easy tips in order for your first transaction to become successful. You need not to learn complex ways in doing this business because you will become familiar with it as you become more active in buying and owning penny stocks. What you need to know now as a newbie is a clear explanation on what to do before buying your first ever penny stocks. Always remember that the root of having great achievements is learning the basics and useful knowledge. I prepare these basic tips for you to know the important things you should consider before buying penny stocks.

The first thing you should do is to find a broker which will serve as a mediator between you and market. One of the main tasks of a broker is to do your request on how much share you want from a certain company. Some of the most outstanding penny stock brokers include Etrade, ChoiceTrade, and Scottrade. These brokers are known to deliver excellent services at reasonable costs, which distinguished them from all other brokers out there. Another thing you should consider is the amount of money you need to invest in a penny stock. This aspect has triggered many issues because many people are not sure of the right amount they need to start buying a penny stock. For your convenience, some experts suggest that a newbie may start at 500 U.S. dollars and a maximum of 3 stocks at one time. This would help you become familiar of the process of buying your first penny stocks. Take note that the more money you have in stocks means the more money at risk. So it is advisable to start using a small amount with the purpose of familiarizing the process before investing big amount. The last thing you should do is to consult an expert who can surely answer all your questions accurately and consistently.

These are just simple but clear tips when starting to buy penny stocks. The bottom line is to become wise and inquisitive when doing this money-making business because there many people out there who try to deceive buyers, which can result to a more complicated situation. Don’t allow yourself to become one of their victims. Protect your money through wise and critical decision making.

Tagged with: • • • •
 
0 Comments
Leave A Response

Choosing when to cash in undervalued penny stocks

On June 1, 2010, In investment

So you found a cheap penny stock, you bought some and it went up. The question now is whether to cash in your chips or stay on the ride. Here are a few different approaches you could take:

  1. Take the money and run. You bought cheap and you have the option of selling high. You have earned the money and the bragging rights which go with making a great stock market profit, what more do you want? Well, you need to consider whether the stock price is going to keep climbing. Buying at $1 and selling at $3 is fantastic but buying at $1 and selling at $5 gives you twice the profit. You should pay as much attention to the company´s situation and the analyst’s comments now as you did when you bought the stock. Has the price reached the maximum limit or is it building even more momentum? You should also consider what you plan to do with the money if you do cash in. If you have identified more undervalued penny stocks then you could do the while thing over again, if not is the money going to be sitting there waiting for the next good investment to come along?
  2. Keep a good thing going. If you think that more profit can come out of it then you could choose to hold tight and keep the investment. You need to keep a close eye on the price and have a minimum and maximum sell price in your head, if it goes past either of those then it’s time to cash in.
  3. Take the profits and maintain the original investment. This is a great choice if you are unsure how the price is going to react following the recent rise, or if you have identified other undervalued penny stocks to invest in. If you bought 500 shares at $1 and they are now worth $5 then you could cash in 400 stocks and the 100 remaining would be worth the same as the 500 you initially bought. This way you still have a chance of profiting from any further rises without risking losing your hard-earned profit.
Tagged with: • •
 
0 Comments
Leave A Response

Risks in Buying Penny Stocks

On January 15, 2010, In investment

Whether or not you have large sums of money to buy penny stocks, this type of investment provides an option for investors with very high potential returns. The Security And Exchange Commission define penny stocks as anything less than five dollars, while others have a cap of three dollars. Either way, these are affordable investment vehicles for the average investor.

One of the most frequently asked questions is whether you can really make money from buying the best penny stocks. The short answer is yes, if you buy some of the more profitable quality penny stocks, but like anything there are risks involved.

Firstly, information is limited. In other words you will not be able to know as much about this company as you would a blue chip firm. Furthermore, the SEC has tried to regulate this type of stock, but if a stock is not listed on a major exchange, very little regulation if any is performed. Many of these companies are close to bankruptcy or struggling and that is often why their share price is in the pennies.  Not all penny stocks are in this bad of  shape however, as some companies just want to raise capital to expand their business or for research and development.

Perhaps the largest hurdle with this type of stock however is the lack of liquidity. When there is a problem with liquidity, many times it will be tough to move the stock and finding a buyer for the price you want could be near impossible. The secondary issue from lack of liquidity is that some investors can buy large amounts of the stock hoping to influence the price so that others may find it attractive to buy. Once the stock price starts to take off and the volume increases, they promptly unload their shares; a classic pump and dump scheme.

Despite the risks however, penny stocks continue to be attractive to investors. Many of these stocks fail miserably but there are some hidden gems that can easily gain 1000% in months or even days. If you want to profit with this type of stock however, you will need to do your homework in researching these types of companies. Investing in stocks is risky enough, and this type of stock is probably the riskiest of them all.   But with risks, can come massive rewards even if you just hit that one largely profitable penny stock.

Tagged with: • •
 
0 Comments
Leave A Response
Go To Top »