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Penny Stock Investing

Can You Really Get Rich Using Penny Stock Investing Strategies?

If the stocks start at just under a dollar, how can an investor hope to become rich in the end? Penny stock investments may begin with a small price to pay, but the gains some investors realize explain the feeding frenzy that’s arisen over this type of investment opportunity.

To get the most riches out of your penny stock investments, it’s important that you pick up information about certain companies before the news hits the primary media stream.

As soon as buzz is generated about a company, the price of the penny stock soars until it no longer falls in the category of penny stocks at all. So how do you get this kind of information if the media isn’t disseminating it to the public yet?

The first thing you can do is research on your own. Penny stock companies usually post their financial data for investors to find, even if they’re not being blasted over the airwaves just yet.

You have to become an investigator of sorts and figure out which companies have the best opportunity for you to profit from an investment of their penny stocks. Sometimes you’ll get wind of a small news item where stocks aren’t even mentioned and it gives you just enough information to leverage an investment of penny stock before the company starts heavily promoting their stocks in connection with the news.

Getting rich as an investor of penny stocks means you have to do a lot of speculation and guesswork. Some investors prefer to wait and see what will happen with a company before they buy stock.

This kind of approach nullifies the opportunity they have to take advantage of the low stock cost, because once investors know for sure that a company is on the rise, everyone will be scrambling for a share and the stock prices will rapidly climb.

One way to stay abreast of up-and-coming penny stock companies is to join one of the many penny stock advice forums on the Internet and watch what others have to say about the choices available to penny stock investors.

Always make sure you do your own investigation into the company as well, but having other investors with a like-minded attitude can help you learn what to look for before shelling out too much money as a novice.

Do Low Prices Mean Low Risks with Penny Stock Investing?

Many men and women who are new to trading in stocks think that penny stocks are the logical choice. The word penny indicates that the investment is small enough that they won’t have to risk a lot for a great deal of potential.

The truth is that investors, novice and seasoned pros alike, need to be mindful that while penny stocks may not cost a lot upfront in the form of cash in hand, it could cost you more if the company’s stock that you’re trading with collapses.

Penny stock investing, just like any other investment opportunity, requires the trader to look carefully at the company’s financial history and expected future earnings as well.

Brokerage firms that help penny stock investors trade in this type of transaction, are required to disclose the risks using a document that tells the customer exactly what the risks are before they choose to hand over their money.

Penny stocks, unlike other kinds of higher-priced stocks, aren’t traded as often, so one of the larger risks involves being stuck with penny stocks once you own them. And since they’re not traded often, the pricing you’re seeing can be inaccurate or out of date.

Perhaps the biggest risk in investing with penny stocks is the mere hype that goes along with it. People are receiving dozens of spam notices in their email inbox each day with promises of building a fortune with penny stock trades.

Some unscrupulous brokerage firms also acquire a lot of the penny stocks and then offer them to investors at a higher value than what they’ll be worth once the artificially inflated demand is gone.

Because penny stock investing requires such a small initial monetary investment, some brokers even break the rules and charge far more for their mark-up commissions. You have to be careful that they’re not overcharging you.

Another unscrupulous tactic brokers sometimes use is to refuse an investor’s request to trade them in for cash once they own the penny stocks. Then you’re stuck without being able to cash them out.

Most brokerage firms operate on a fair basis, but you want to make sure your firm is handling everything with your best interest and minimizing the risks involved with penny stock investing.

What Is Penny Stock Investing?

A penny stock is defined as any stock that is trading for less than one dollar. Some investors put their own definition into place for penny stocks, such as any stock priced below fifty cents.

Others consider a true penny stock to be a stock worth less than one dollar that’s trading off of a major stock exchange. Again, it all depends on who you ask because officially, it doesn’t matter if the stock is on a major exchange because the defining element is the price of the stock, not where it’s being traded.

Penny stocks sometimes go by different names. Day traders and investors use that term interchangeably with terms such as nano, micro, and small caps. Penny stocks come from companies with a small amount of capitalizations, which means the total value of their company stock

You can invest in penny stocks with a small initial investment, but you usually have less information to go by when it comes to evaluating the company. With a larger company that has stocks trading at more than a dollar, you’re able to access reports filed with the SEC to conduct a review before you invest.

But even though penny stocks don’t afford you that luxury, it’s a way to get in the ground floor of investing with an up-and-coming company that has limitless potential. You may have to do more legwork to do your homework on penny stock companies, but it can pay off in your investments.

If you find a penny stock that you’d like to consider, you want to check to see if the company has made their financial reports available to the public. Don’t just take someone’s word for it that a certain penny stock is worth investing in.

If you find anything unusual, such as the auditors haven’t certified a company’s financial statements, then you should be cautious about trading in that stock. Another red flag is if the auditors have declared that the company may not have enough money to keep operating.

With penny stock investing, there are no minimum standards they have to meet for their listings, since they’re done on the OTCBB (OTC Bulletin Board) and the Pink Sheets.

Where does risk play a factor in penny stock investing? While the cost to trade penny stocks is relatively low, the risk is a bit higher because you don’t have a way to see the history of the company or the stocks and how it factors into your investment strategy.

What Makes a Penny Stock Attractive?

For a penny stock investor, the cost isn’t all that matters when it comes to choosing what company you wish to invest with. Just because it costs less than a dollar apiece doesn’t mean the trader wants to choose penny stocks that won’t yield and investment.

One factor that a penny stock investor is looking for when he’s evaluating which company’s stocks to trade in is the expectation of its performance in the marketplace. Knowing how will the market’s investors react to this particular stock will play an important role in whether the investor gains or loses on their original investment.

Much of the expectations are based on news that comes about in regards to a company’s financial forecast and growth. If news hits the market and a penny stock’s value rises slowly throughout the day, then it can be a strong projection that this particular penny stock is a worthwhile investment.

Slow, gradual growth of a penny stock’s value usually means it has the potential to triple or quadruple its value quickly and easily. On the other hand, when a penny stock shoots up in value right when the market opens, it can be wise to stave off your desire to invest in it until you see if it’s going to drop back down.

Sometimes penny stocks with a surge in value early on wind up plummeting back down to its original value, if not lower than what it was on opening. This gives you the perfect opportunity to invest in this particular penny stock and save yourself the risk of losing your investment from false demand.

Some investors who turn their noses up at penny stock investing will consider dabbling in it if they find a company that shows amazing promise and happens to offer penny stocks as their only trading capacity.

Penny stock investing gives you the chance to make a bundle using very little initial start-up cash, which is another major factor in what makes them attractive to beginners getting used to their sea legs in the world of trading.

As unpredictable as they can be, penny stocks are attractive because of the thrill of the possibility that you could choose a company whose stocks result in major financial gains for you, boosting your confidence as an investor hoping to achieve security and stability.

It’s a little more feasible than playing the lottery, and millions of people spend a portion of every paycheck on lottery tickets. With penny stocks, you get more than a mere chance at success – you can look at the qualities that make a certain stock attractive and then decide based on those qualities whether or not you want to take the risk.

When Should I Cash Out on My Penny Stock Investment?

Investing in penny stocks can mean it takes awhile to make substantial gains where you’re interested in cashing out of our investment. Some shady brokers won’t even speak to an investor if they find out they’re hoping to cash out of their penny stock investment.

As an investor of penny stocks, you’ll want to watch your trades and see when is a good time to cash out so that you benefit the most from your timing. You have to consider the timing and watch the penny stock closely because if you wait too long, the investment could turn south and the stock’s value could lose points considerably.

Instead of selling off your entire penny stock investment, if you need the money a cash out will bring you, try to only cash out on a smaller percentage of your holdings. That way, if the stock’s value is still on the rise, you won’t lose out on the potential gains.

Some investors cash out based purely on their emotions. They may be worried that the stock is about to crash and then panic and sell out too soon. Or, they could believe their fortune in penny stocks has been too good, so they cash out to avoid anything bad from happening.

Try to keep your emotions in check and cash out only based on what you know for sure. Let the performance of the stock to date speak for itself and consider any news about the company that you’ve learned since you originally purchased the stocks.

When you do cash out, take your original investment and re-invest it, enjoying your profits that were gained from the first penny stock investment you succeeded at. Or, take the profits you made and re-invest them so that if you lose anything on your second investment, you’re not cashing out with less than you originally started with.

If you’ve done really well in your penny stock investments, make sure that you don’t just jump into a second investment without thinking about which company you’re choosing first. You want to take the same care that you took the first time around so that your rewards will equal or exceed the first gains.

If lady luck isn’t on your side and you don’t cash out and miss the boat to big profits, evaluate the life of the investment and see where it went wrong. Knowing why your penny stock investment caused you to lose money will help you avoid the same mishap in subsequent investments.