Penny Stock Brokers 4u

Maybe you just got a nice bonus at work, or a larger tax refund than you were expecting, or received a small inheritance and now you are thinking of how to make your nice little windfall work for you. You may have first looked at some low risk investments like bank certificates of deposits and decided that the return on them just isn’t enough to coax you away from buying that new car instead. So perhaps you start wondering about buying some stock, but with your relatively small investment you see you are only going to get a handful of shares at best and unless they are paying a dividend, you may have to wait quite awhile before you see any increase on your investment.

You are about to give up and buy that car, when a little more browsing brings you another option – penny stocks. Now you see thousands of opportunities to reap huge rewards, and every one of them is listed under “Hot Penny Stocks.” Now before you run headlong into this pot of gold, step back and fully understand what they are. Penny stocks are those often sold for pennies a share, hence the name, but can actually be up to $5 per share – though still much less than conventional stocks. The companies that offer them can be start-up companies, those in danger of bankruptcy, or sometimes even nonexistent scam attempts and since you do not know which one you have before you it can be rather risky.

When someone buys penny stocks they may be fortunate enough to experience percentage gains of 20%, 50%, 100% or even 1000% or more which makes them very appealing. However, more penny stocks become absolutely worthless than those that explode despite what all the hype you will read online tells you. The truth is that nobody can give you a guarantee that any particular penny stock will be hot. That is why most investors do not invest in penny stocks. But, right now we are considering the investor that has a few bucks to invest and may not be terribly concerned about the potential risk. If your rationale is that your alternative is to purchase an asset such as a car that will also depreciate until it is worth nothing, then to take a chance on an investment that just might turn out to be profitable may make perfect sense.

So, assuming you are looking at penny stocks, let us look at what your steps should be.

• Educate – Your first step is to fully understand how the stock market works. Learn how to choose a stock brokerage, how to make trades and where to find information.
• Choose a brokerage – You will need to decide first on what type of brokerage you need, whether full-service or discount. Generally you will find that with penny stock transactions you will be best to deal with a discount broker. Many full-service brokers either do not handle penny stock transactions or impose extra fees that make them cost prohibitive. Among the discount brokers, review their commission and fee structures. Find out how quickly they process transactions and be sure their online services are easy enough for you to use.
• Research – Look for newsletters, blogs, chat rooms and other sources to be able to have an ear on what is going on in the markets. Not all sources are great ones though as some are in existence just to promote whichever companies pay them to do so. When it comes to penny stocks, it is always “buyer beware” when following any advice. Be wary of any news that seems more hype than facts, as it is generally meant to lure investors into placing their trust where they shouldn’t. Learn the indicators of a bad stock choice so you avoid them.
• Patience – Take your time when researching stocks to invest in. Look at indicators such as trading volume, historical prices, financials, and company and industry news always keeping in mind any agenda that may be the case by the reporting source.
• Plan – Set up a plan for your total investment such as whether you plan to reinvest any profits or pull them to put into a safer vehicle. Also set a complete plan for each stock – at what price will you buy, at what price you will sell, will you sell if certain indicators are in place, will you hold as a long-term investment, and so forth. Once you have set a plan for a stock, stick with it changing your plan only if new information warrants it rather than letting emotion or greed dictate a change. It can be tempting to hold a stock past the point you intended when you see dollar signs and think this could be the one – but don’t do it! As you establish an exit plan for each stock, so also determine at what point you may wish to exit penny stock investing completely. Some investors only continue until they have their total portfolio reach a predetermined goal amount at which time they move on to the next stage of their plan. Or, you may have a figure in mind as your total stop loss figure – a point at which you will stop investing in penny stocks if you only have so much remaining after a string of losses. Investing in penny stocks is like holding a hand in poker – you have to know when to hold them, and when to fold them.

Clearly, investing in penny stocks can be an enjoyable and exciting experience. Even with some losses it can still be a fun way to pass some time – as long as you are not gambling the family farm on them! Some investors like to think that everything they set aside for this endeavor is lost money right at the onset so they can just enjoy the activity. With penny stocks being so risky, this is probably the best way to look at them.