What are Penny Stocks?
Imagine if you will, a music store. You walk in and it is filled with CDs (records, iTune songs, whatever works for your imagination here people) of all types. You fancy yourself as a pretty big music fan, but you have never heard of any of these bands or artists. Every style of music is here; from One-Hit wonders to big name bands, acoustic to the hardest rock your ears can take. However, not one of the artists is ringing any bells in your vast musical mind.
How would you pick which one has the potential to become the next arena-filler and award winner? Hopefully with some help from an entity that specializes in these unknown quantities.
Welcome to the world of Penny Stocks. In most cases, these stocks are very small companies (i.e. micro-cap) with shares that are speculative in nature (aren’t they all though?). They are generally not governed by the regulatory agencies the way larger stocks are, so they are subject to limited listings.
The term “Penny Stock” can be a bit of a misnomer, though. While many of them are traded for less than a cup of coffee, most financial organizations consider any stock trading for less than $5.00 a so-called “Penny Stock.” Some financial analysts focus on market capitalization and put any stock with a cap of $100 million or less in this category.
So how do you find the next big artist, or in this case, the next big Apple or Microsoft? Well, there are two ways to answer this question. Both start with research and your own called due diligence. These smaller stocks aren’t covered by analysts and the news media the way Google or Berkshire Hathaway are. You need to know where to look and what you are looking at when you find it.
Penny Stock newsletters have always been an integral part of the information process when it comes to this type of investing. Years ago, these newsletters were key to the manipulation of these stocks, and if timed correctly, could create very large gains. Time it wrong though, and that cliff comes up very quickly, and with it, your investment. Regulation has gotten much stricter, and these newsletters have indeed become a truly valuable resource.
Thanks to today’s technology and the internet, you have many more resources at your fingertips than ever before.
There are websites, message boards, chat rooms and any number of other opportunities out there if you look for them. It is imperative to separate the good material from the “white noise” out there. The site may look professional, or the person on the message board may be a “board veteran,” but that doesn’t mean that either is any better than you are at picking these stocks. A good site and/or message board can be an amazing resource to rely on once you find one that makes sense to you.
These resources can help you find the next big stock, but the second answer to the question posed earlier is you don’t have to find that big winner. It is quite normal to buy a $.50 stock and double your money as it runs up to $1.00. Trying to double your money on a stock like Intel could take a lifetime. Doubling your money isn’t necessarily the goal with each trade. When you play these trades purely on performance and dollar amount, you could regularly bring in double digit returns with the right type of research and trading discipline.
It is now easier than ever to trade Penny Stocks. Discount online brokers make it cheap, and with trading apps, you can trade from your phone from just about anywhere. These days you can be sitting in Boise, Idaho trading the markets in Asia in real time if it interests you. Don’t be fooled though. Low value or share price does not mean low risk. There are many investors that have and will lose their money investing in the stock market, regardless of share price.
There are no guarantees in anystock market investment. The dangers here can be higher than purchasing mutual funds, ETFs or other equities, but so are the rewards. With solid research and a disciplined approach to trading, the opportunities are endless for the savvy investor.
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Disclaimer: PennyStockDaily.com and all of its writers are not licensed investment advisors. Many of our emails, blog posts, articles, videos, and all materials put out by PennyStockDaily.com regarding specific companies are paid advertisements, and are not a solicitation to buy or sell securities. PennyStockDaily.com is for entertainment purposes only, never make investment decisions based on information from PennyStockDaily.com. All information from PennyStockDaily.com should merely serve as a starting point for you to do your own research. Always consult with a licensed professional before investing. Penny stocks are extremely high risk, only invest what you are prepared to lose.