Everyone today is looking for a way to make a buck fast. With a declining economy, high unemployment, rampant foreclosures and worthless retirements Americans are turning to alternate methods of investments. Especially those that will not take a lot of money out of their pockets.
Penny stocks is just one of those methods. What is this kind of stocks? They are common stocks that cost less than $5.00 a share. Today it is impossible to buy stocks for a penny but $5.00 seems like a good deal. Just keep in mind when you purchase peny stock they are usually offered by new untested companies, who are looking for a way to raise capital. In this article I will highlight some of the things you should know before you invest your hard earned money in penny stocks.
First, it is essential that you find out as much as you can about a particular penny stock. It is true that you could possibly earn some money quickly but at the same time many people have also lost money fast.
Secondly, you should work with a broker who is familiar with stocks. You want someone who deals with them on a regular basis and will tell you the truth, not what they think you want to hear.
Third, if you do not use a broker I suggest you at least subscribe to an online subscription service. With the aid of a broker or an online service you should be able to be a more informed investor.
Fourth, One thing you should definitely be aware of is that penny stocks are dealt with over the counter, not on the stock exchange. Therefore brokers work on commissions based on transactions.
Fifth, become knowledgeable with the different companies that offer penny stocks. You want to invest your money with well run companies that offer a decent product. You want to feel that the company has a good chance of success.
Lastly, you should never have more than 10% of your portfolio in penny stocks and do keep in mind that 70% of investors do lose money with penny stocks.
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