Buying Penny Stocks
“What is a penny stock?” This is a question that is asked every day. The answer depends on who you ask.
Typically a penny stock is a stock that is valued at less than $5.00, but others say that it’s less than $1.00. Buying penny stocks can be a profitable venture or a losing proposition.
Penny stocks are stocks of a new company that is trying to raise capitol for one reason or another. Since they are new and small, the information on these stocks are limited and may have restricted liquidity. Also a financial report could be hard to find on that particular company. The risks involved in trading them can vary. The stocks are not as active compared to others in the market which makes it hard to predict.
A penny stock can move up or down by 50% or better in a single day. This does make trading penny stocks quite attractive. To reduce your risks, you need to do research on each company that your looking to invest in. Do not trust someone else’ research, many brokers will inflate numbers to look more attractive than they really are and in doing so you can lose everything that you invested
Many people who are buying penny stocks are usually considered day traders. They’ll buy a stock one day and wait for the gains that they are looking for and sell the next day. They also tell everyone that they know that this is a great stock just so you will invest in the company causing the price to go up to where they will get out with their profits and leave you high and dry. Anyone that tells you that they have some great insider information on a company and that you should get in on the action, is someone that you shouldn’t be listening to in the first place. It’s illegal for anyone who has information that has not been revealed on a company to pass that info to someone else.
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Thinking Of Buying Penny Stocks
Thinking of buying penny stocks? Be careful of which ones you’ll want to invest in. A penny stock is a stock that is sold by a company that is either new or the company is trying to raise capitol for basic operation or expansion. They are referred to as penny stocks because the value is less than $5.00. Many different brokers offer penny stocks that are traded on the OTCBB (over-the-counter bulletin board). You can also subscribe to an on-line service. You know the ones, that tell you that they’ve invested in a company that the value grew 5000% in a short time.
The issue with buying penny stocks is that it is very risky. The statistics for investors who trade penny stocks and lost money is some where near 70%, so the odds are against you. You also need to be aware that there are some brokers who will inflate the stock by dishonest practices. You need to research the broker who offers these stocks just as much as you do in the stock itself. If they claim to having insider information, that is a sign that you need to walk away from that firm. The only way to find a good penny stock to invest in is to consult with a broker, but be careful they make money by make sales and may only have their own interest in mind. There is big money in trading penny stocks for these guys and to do that they need to sell you the stock.
Many investors have made a fortune in buying penny stocks, but for every great windfall stock that made millions, there are about nine that lost billions collectively. Look at Yahoo, they were trading at $0.78 a one time and now trade in the $20 range. Like I said though, that’s only one of thousands of companies that are traded every day.
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Choose Wisely When Buying Penny Stocks
Buying penny stocks can be very rewarding if you know what your doing. In the alternative energy sector there are many companies that trade below the $5.00 range. Which is considered a penny stock.
T Boone Pickens has been heavily playing in the wind power energy market. He is investing in the Texas wind power fields that will be started in the near future. Companies that are in the alternative energy sector have been moving quite well, but that does not mean that every company is moving forward.
Wind power energy is not a new concept, it’s now moved to the front of the line because of the rise in oil prices. The industry is make strides in new technologies as well as investors who are willing to back the company financially for research and development. If you want to make big money in the stock market, this may be the sector that you need to look into.
Some of the companies that look good are ones that have patents on their designs. That’s considered intellectual property which adds value to the company. Different companies do different things in the field. Some are manufacturers while others are installers.
Many of the manufacturers will only deal in one aspect of the wind power industry. While one may build the turbines for the towers and another supplies the cable to transfer the power, you’ll need to know where they stand in the grand scheme of it all.
In the solar power industry there are many stocks that are considered penny stocks. The technology is not as efficient as wind power so there are more companies that could fail in growing. In that field there are new and less cost effective methods being done that a smaller company may be able to grow.
So when you are thinking of buying penny stocks, look at each company carefully and choose wisely.
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