After determining your investment goals and budget, you might have come across the realm of penny stocks. So, what are these?
As the name might suggest, penny stocks are shares which trade for under $5.00 each. With a lower investment budget, penny stocks can be a fun and easy option to start buying stocks.
The simple science of success with penny stocks is understanding that investments are simply shares in individual companies. When the companies do well by increasing profits or growing in size, the penny stock, 99% of the time, follows suit and increases in value.
Penny stocks is just like investing in more substantial stocks. The only difference is that the share price is lower and, more often than not, the company is smaller, newer, and undiscovered.
When buying stocks online, a few things are crucial to know, especially when you are going the DIY route.
For instance, three main things to know are 1) if you are buying or selling; 2) the ticker symbol of the stock and name of the company; and, 3) the market the stock trades on.
Investing in penny stocks has proven to be a pattern of a few different scenarios that play out again and again over the generations. Arming yourself with the past history of the penny stock is a way to enhance clarity about what your potential investment future could be.
As pennystocks.org reports, “Going forward without looking back dooms you to mistakes that have already been made a thousand times.” Yes, you are buying penny stocks, but make sure every penny is worth it!
Buying penny stocks has received a bad reputation in the past. The main reason for this negative connotation has been a result of investors being burned by scams. Another main reason has been those who have unknowingly invested in low-quality companies which end up tanking.
You can avoid the pitfalls of scams and low-quality companies by, again, doing your research. Choosing high-quality companies ensures a significant chance of enjoying the ride of a promising company turning into a major revenue builder over time.
Buying penny stocks online can be easy; however, avoid free stock picks, dark markets, and -again- focus on high-quality companies as thebalance.com suggests.
A good resource is Peter Leeds for all things investing in penny stocks. He talks all aspects and angles of penny stocks so that you can be thoroughly knowledgeable about the penny stock investment process.
If you desire to go the DIY route a good way to get started is paper trading penny stocks. Paper trading is keeping track of imaginary money in real-time stocks to see how you would have actually done if you had actually invested. This can give you a good sense of how your strategies may or may not work with the penny stocks you are considering.
Peter Leeds offer a newsletter that has helped over 41,000 subscribers choose which penny stocks to invest in for a long-term success rate. Arm yourself with as much knowledge as possible to avoid falling prey to a scam or a low-quality company this way.
Researching companies that have undervalued penny stock prices will ensure the most bang for your buck. The best strategy overall is PICKING A HIGH QUALITY COMPANY.
Have we said that enough? We cannot stress its significance in your potential success when buying stocks.
Once you are confident in your choice, it is just a matter of observing the company’s procedures and growth rate. By investing in smaller, newer, undiscovered, and high-quality companies, you get the unique privilege of being a part of that company’s success story as they rise more and more in prominence.
Investing in penny stocks is a long-term process so don’t feel the need to rush into things which will only result in sloppy penny stock trades and potentially big mistakes.
In the actual buying process of penny stocks, it is a good idea to know the number of stocks you would like to purchase beforehand.
This will largely determine whether you choose to go with market or limit price. If you are more flexible in your budget and you have a set number of penny stocks you would like to purchase, market price would be the way to go. Buying at market price means that you won’t necessarily know what price you are paying at the moment of the transaction, but you will be guaranteed that the set number of penny stocks will be purchased.
If you have a tighter budget, buying with a limit price is more the way to go. With a limit price, you set the limit at which you are willing to purchase a stock. If a stock goes above your limit price, the penny stocks will not be purchased.
Above all have patience in the process of starting out in buying penny stocks.
Seek advisers and high-quality resources to ensure a best buying strategy.
Best of luck to you delving into the exciting world of investing in penny stocks. May your pennies turn into lump sums!