A "penny stock" isn't a literal term, but compared to the prices of higher stocks, it may seem like a bargain. Common stocks that cost less than $5 are usually called penny stocks, and while they have a lower individual price, investing in small stocks can be just as risky as any of the higher priced variety, if not more so in some cases. There are some misconceptions about penny stocks that should be cleared up:
·Penny stocks are not a "get rich quick" stock.
·Penny shares are not a guaranteed profit.
·Not every tiny stock is a bargain.
With that in mind, let's look at how to invest in penny stocks for the absolute beginner.
Getting Started
The first step is to do your research. There are a lot of stories about penny shares helping investors to get rich overnight, but you need to figure out what makes the most sense to you. There are brokers that actually specialize in handling penny stocks. These brokers may be able to point you toward some stocks to watch, but do your own research before you make an investment through the brokerage. Learn how to read the company financial statement.
Also, think about investing in a small stock that is listed on the NASDAQ. If you have absolutely no experience in investing in the stock exchange, then these are the stocks that are going to have the most "security," although it is still not a sure thing. Stocks that have been de-listed are usually indicative of a company that is going through some financial turmoil, and what you want is something that is a little more stable, whether you're investing in tiny stocks or larger offerings.
Keep Researching
After you've made your investment, stay on the lookout for other good tiny stocks and how they're performing on the market. Because penny stocks should account for 1/10th of your investment portfolio or less, these aren't going to be your prime performers. Instead, they're a way to diversify your investment strategy and get in on some unique and affordable investment opportunities. The more research that you do on the subject, the easier it'll be to find the best penny shares for your investment strategy.
Awesome penny shares aren't usually obvious to the new investor. Your broker can most likely point you toward some options that are worth considering if you want to get the best bang for your buck.
Written by Samory Borry
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