Penny Stock Brokers 4u

Making a penny stock investment is most definitely not for the faint of heart; while you can see huge gains, you can also lose the shirt off your back. In this regard they are not unlike more conventional stock but the number than fail overall is a much higher percentage making them one of the most risky investments a person can make. With all the hype about penny stock investments doubling, tripling and even reaping 1,000% percent or more returns, it is not surprising that penny stocks lure those looking for a quick fortune. However, the wise investor will heed the same advice given to a gambler – do not risk more than you can comfortably afford to lose.

So, why is it that there are so many websites on the Internet about investing in penny stocks (millions of them will come up on a web search!) that make claims that you can get rich beyond your wildest dreams on them? Obviously they have something to sell – whether they charge the investor for their software, newsletter or advice or they are being paid by companies to promote their shares. Does this mean they are not right about the penny stocks they recommend? Of course not, they may actually pick more winners than losers overall but it can also be true that they just do not tell you about the losers.  So while you can certainly look to these sources for information, do not think you can overlook the important step of performing your own due diligence before investing any portion of your portfolio. Doing penny stock research is very difficult as information on such companies can be sketchy at best and may not even be completely unbiased and truthful. It is especially difficult to find information about those penny stocks that are listed only on the Pink Sheets as they are not even required to file quarterly or annual financial statements to be able to file there. Those listed on the OTC BB are required to file statements which will make them easier to research so that you can determine which ones have been making some money and are being properly managed. Even better are those that actually make it to the major exchanges although they may have already seen their largest profit jump happen already but ones that may continue to grow steadily are not without merit to the investor.

As you are reviewing various penny stock offerings, dig down until you get to the real facts and avoid all the hype you may encounter. Determine just what the company is about, what they do and produce, what their mission statement is, and where they appear to be headed rather than paying attention to any promises that sound much too good to be true.  Look at the owners and officers of the company and check to see what they have done in the past. If their name is associated with other failed companies or is completely new on the scene, it may indicate that the offering is not legitimate and a scam. If you cannot verify a physical location for the company you cannot be certain that it is a real company so be leery of these.

Look also at the daily trading volume of the penny stock. If the volume stays at a very low level you may not be able to locate a buyer when it comes time to sell – imagine holding 5,000 shares or more of something that is only trading a few hundred each day. If it is running in high spurts or is inexplicably sporadic it may be being manipulated by some investors or even the company itself looking to bring attention to it so they can dump their shares or sell to more unsuspecting victims.

Be sure to have a complete plan laid out before you jump into the world of penny stock investing. Determine what percentage of your portfolio you plan to “wager” on penny stock – you may want to move this amount to a separate brokerage account so that you are sure to keep yourself to your self-imposed limit. Most experts agree that you should not invest more than 2 to 5% of your portfolio on risky investments and that you should never consider putting more than two or three thousand dollars into any one offering. You must also decide whether you will keep take any profits and buy additional penny stocks or if you plan to move them back into your more conventional investment portfolio as you earn them.

Furthermore, keep in mind that this type of investment is going to take some hand-holding so do not have so much diversification that you cannot keep up with following each one regularly and giving it constant attention. For each stock that you purchase, have a profit goal in mind and set it up with a stop loss as well – and do not waver from that goal unless there is information involved not just emotion and greed. You have to “know when to hold them, and know when to fold them” in any stock but in penny stock this is even truer. While any stock can see its price plummet like a rock (remember Enron?), a penny stock can do this in the blink of an eye.

This article is by no means all the advice you need before you invest any part of your portfolio into penny stocks. It is only meant to give you the idea that you have to learn a great deal before you proceed and risk your capital. Investing in penny stocks can be a bit like swimming down to a trunk of treasure in shark infested waters – you know there could be a lot of wealth in that trunk but you could die trying to get it. Armed with the proper weapons – in this case, knowledge – and you might just get to lift that lid and reap the rewards.