An Intro to Penny Stocks

If you’re looking for a way to get a start in investing, a good way to go could be buying and trading penny stocks. These are a good start in the stock market for novice investors and young professionals, who lack time for complicated investment portfolios.

What Are Penny Stocks?

If you’re not familiar with penny stocks, they are stocks sold at a relatively low cost per share, around five dollars or less. The price per share can even less than a dollar, depending on your penny stock picks. As you might guess, the term “penny stock” does refer to their low cost investment, but their price makes them easy as a share to manipulate in the market. These stocks are generally purchased from small. public companies that are outside of the major market exchanges. The phrase “over-the-counter” refers to stocks that are traded by a dealer network as opposed to on a centralized market exchange. Often, these are new companies that haven’t yet worked their way up to the high cost stocks of the major stock market exchanges, such as NASDAQ and the New York Stock Exchange.

Why Trade Penny Stocks?

In comparison to long-term investments, the over-the-counter penny stock market is more fast-paced, which can be very exciting to some investors but stressful for those not used to making quick, decisive decision. Often, new investors will find these low-cost stocks to be less intimidating than trading stocks requiring much larger investments. You might not have enough money to invest in multiple shares of a company, where an individual share worth hundreds of dollars. Also, these are prime investments for those who don’t have enough funds to set aside investments in $20 shares. The low cost and low risk aspect is the most appealing part of trading penny stocks. Although, any investment requires a certain amount of risk, it’s an amount most can afford to lose.

Where to Start?

If you’re willing to make a time commitment to learning about what mutual funds will be best for you, you can make your own picks. However, this is not recommending for beginner investors without a background in following the market. Your best bet is to be find an experienced financial advisor. You’ll want to be careful and choose someone who will give you honest tips, as there are predatory penny stock dealers online. Research reviews for advisors online, and check an background information included on their website.

Once you have a better understanding of penny stocks, you are ready to start researching stock picks, and advisors to help.

[Note from Md: This was a guest post introducing and explaining a financial topic.]

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