Penny stocks are a way for new companies to offer stocks in their growing business. Since these companies are not yet ready for the big time stock market, they will offer stock at low prices – usually starting from under $1 up to $5 per share.
Because the companies are young, and often upstarts, this means they are much riskier investments than more established businesses. However, part of the fun of getting into penny stock investment is the fact that you can start out investing a very low amount of money and watch a company rise in value over a short period of time. Sometimes this happens because companies have a hot product or lots of buzz in the marketplace.
Lots of investors are attracted to trade penny stock because it doesn’t cost a lot of money to buy any particular stock and you can buy penny stock online for a $100 investment. Compare this to one share of the popular Google stock right now and you’ll see which one is easier to obtain.
Just because penny stocks are cheaper, doesn’t mean you can sit back and relax while the money rolls in. Start up companies often go out of business or go bankrupt, so you could think you’ve got a winner and end up with a real turkey.
Investment goals: before you call up your penny stock broker, you should set an investment goal for yourself.
How much money are you willing to invest in penny stocks?
How much money can you afford to lose?
Will you reinvest all of your profits or just some of them?
Do you need to use the money right away, or do you want to save it for retirement?
Knowing why you are investing in penny stocks will help keep you focused.
Emotional Rollercoaster: Investing in penny stocks is a high-risk venture.
Are you prepared to handle the ups and downs of the penny stock market?
Hopefully, the answer is yes, but remember – people are more likely to lose money in the market when they buy because they are emotionally excited and sell when they are desperate. Because there is real risk involved of losing your hard earned money, you should try to temper your investment decisions with thorough penny stock research and reasoned choices. In the long run, this will help you to weather the stormy investment seas.
What happens if you get a hot penny stock tip?
Again, make sure you are making wise decisions for yourself after weighing all the information about the company and the market.
There are two types of penny stock investor: Day Trader and Long Term Investor
Day Trading: Day trading stock online is one of today’s most popular ways to invest in stocks. Day trading penny stock is exciting to many people. Day trading means you will never hold onto a stock for very long. Some stocks you will buy and sell on the same day. Day trading is risky and you have to pay constant attention to your stocks in order to do well at this game.
Long Term Investing: If you don’t want to bother with the stomach churning drama of daily online penny stock trading, you can choose to keep your penny stocks for a longer period of time, even up to a year or more. This will involve a longer term investment strategy that you should consult with a financial expert about.
The key to doing well in penny stocks is to do your research on the penny stock market and get some expert financial advice on how to make wise investment decisions. There are a lot of books and newsletters out there offered by investment experts who can steer you in the right direction. Many of these systems recommend that you paper trade first before investing any real money so you can get used to how things work – this is a very good idea.
If you have done your research and feel you are ready to invest in penny stocks, then it’s time to call up a reliable investment broker and put in your first order. Buying penny stock is easy once you’ve prepared yourself with some good information. Hopefully, this will be the beginning of a lucrative way of increasing your net worth over many years.