Acquiring the best stocks to buy is not really an easy task that you can effortlessly purchase. There are certain processes that you must undergo before becoming a successful shareholder of a company. When you decide to invest with this kind of ownership it would be best to know first the top company that you should gain ownership. You must at least have your own list of the stock qualities that has the potential to be successful against other stocks.

If a company is already well-known and sells products that are popular in the market, it means that it also has excellent stocks. This is important when buying stocks because most of the companies that already established respects from the consumers also gain huge income that will mean a success on their part. As a buyer, you would like to invest in a company that is already established good reputation to the customers that’s why it is important that the stock that you are going to buy has excellent stocks.

Another important factor that you might like to look into penny stocks to buy is the earnings per share of a company. Compare to the excellent stocks, the earnings per share is perhaps the most important factor that a future stockholder must look into. This way you will be able to determine the earnings that a company acquires each year or more. When a company has acquired huge earnings in certain period of time it only means that as a shareholder you will get huge income.

When you come right down to it, there’s a law of averages that you need to think about when making a penny stock investment.

Just recently I bought Sirius/XM Satellite radio (NASDAQ: SIRI), for $0.05 per share and took it up to $.50 per share in just one month. That is a a gain of 900%. Those types of percentage gains can only be done with penny stocks. The reason I said that I haven’t made as much money with these type of stocks is because a year earlier I bought into a stock at $2.94 (cost average) and watch it drop down to below $2.00 in no time at all. I had more of a stake in that company than I did with the more recent one.

I’ve said it before and I’ll say it again, you need to look hard at any company that are thinking of investing or trading in. Look at their balance sheet, their debt-to-earnings ratio, listen in on the conference calls when and if they’re available. If you don’t and end up losing a big chunk of your investments, you have no one else to blame.

They are plenty of people out there that say that they can “show” you the way to picking penny stocks, but the truth of the matter is that you pick penny stocks the same way you pick any publicly traded stock, you do your research into the company first. If you can’t do that, then you shouldn’t be buying stocks in the first place.

I’ve been watching Sirius for quite some time and the reason I got into the company was because I knew that the company would find the financing that they needed. I also know that this company isn’t going anywhere anytime soon.

In the auto industry we now see General Motors (NYSE:GM) and Ford (NYSE:F) trading in the $3 range. GM hasn’t seen these levels since 1943. In January 1999 they were trading at $87 per share and in the beginning of this year (2008) they were at $19. Now eleven months later they are on the verge of bankruptcy and trading at just $3 per share.

Ford is in the simular situation, they were at their all time high of $37 per share in March 1998 and are now trading at less than $2 per share.

Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) the two government sponsored mortgage brokers have also lost 98% of their valus since the beginning of this year.

American International Group (NYSE:AIG) were just saved by the government after losing 97% of their value.

For all intent and purpose, these stocks can now be classified as penny stocks. Many traders, especially the newbies and amateurs trade penny stocks for a couple of reasons. One, the price per share is cheap and two, penny stocks typically have the tendency to jump big when refer to as percentage gainers.

Do you really want to start trading these companies that I’ve listed? The answer should be no, but I’m sure quite a few of you guys and gals out there are already do so. I will tell you that these companies as well as their stocks are broken. They are all leading companies that help build this country, but because of bad business practices are now in big trouble of going away for good.

So if you want to trade these penny stocks, go right ahead, but don’t say I didn’t warn you.

Like I said there are many that are listed on the big board, most of them are alternative energy companies that are trying to hit it big. When you want to buy penny stocks online there are many places that you can go.

The one that I like the most is TD Ameritrade, a online broker that I’ve used for some time now. Their customer service is beyond great, which is to me the most important part of choosing a online broker. Since I’ve used them for so long and so much for my trades, I now pay only $7 a trade no matter how many share I decide to puchase.

Zecco is another company that is out there to use. They offer you 10 free trades per month with a $2500 minimum equity balance, after that it’s $4.50 per trade. their customer service is not as good as Ameritrade, but they do have a community board where you can talk to other traders for ideas (rule #1- there’s no such thing as a good stock tip).

Another company that I’ve not used is Scottrade. They charge $7 per trade, but they do have a lot of other fees that are listed on their site for other services that they provide. I never used them because of that reason. I feel that if you are there to provide a service of trading stocks, then that is where that only charge should be.

If you look on the internet for an online broker, you will find that there are many more, but do your research on these companies before using any of them.

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.

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.

When you want to start buying stocks I suggest you look at ETF’s (Exchanged Traded Fund) and Mutual Funds. There are costs to each of them. You need to do your due diligence in looking for the right one. If your are starting out with less than $50,000, ETF’s and Mutual Funds are the way to go.

Buying penny stocks is what people who are uneducated in the stock market do. Don’t get me wrong, many people become very rich trading penny stocks. You hear it all the time, but what you don’t hear is that many more lose money playing it this way.

There are great companies that are on the rise in their industry, but not many. For every ten companies that are started, nine out those ten fail. Out of the ones that make it far enough to be traded on the OTCBB (over-the-counter bulletin board), at least 30% never make it past their initial public offering price.

You need to do research on the companies that you want to invest in. Learn to read financial statements, balance sheets and listen to conference calls on their earnings reports. Typically you need to do 5-8 hours of research for each company you are looking to invest in. After you buy into a company you will need to do at least one hour each week on each company. Do what I like to refer to as doing you due diligence, will end up saving you a lot of headaches later on.

Buying penny stocks can be very rewarding or quite damaging to your portfolio. Research must be done to minimize the risks and increase the gains. You must look into the company’s history to see their growth in the sector that they are in. Most companies that are considered a penny stock (valued less than $5.00) are in technologies, biotech, and alternative energies. There are few that are in the other sectors like GameZnFlix (OTCBB: GMFX) which is traded on the OTCBB (over-the-counter bulletin board). The company is in the business of entertainment. Like Blockbuster and Netflix, they have an on-line video and games rental program.

The reason I speak of them is that in buying penny stocks if you don’t look at the company’s fundamentals you can lose a lot of money. You don’t have to go too far in the history, just enough to get the idea of what the risks are. In September, 2007 the company went ahead and offered a reverse-split for the outstanding stocks. For every ten shares that you owned they gave you one. They value was adjusted to be worth the same so you didn’t lose the value of the holdings. The new price was $0.10 a share. At that price you can buy 5000 shares totaling just $500. If the stock doubled (which is not hard for most stocks to do at this price range), you would make $500 on a $500 investment (a return of 100%). Unfortunately the company’s fundamentals were not in order as well as a positive revenue and the share price went down. Needless to say that the value of the stock has fallen to an all time low of $0.0001, which now makes the value of your holdings $0.50 (yes, that is 50 cents.)

At this point and you were to purchase 500,000 shares at $0.0001 it would cost you only $50. If this company was to turn it around (which I don’t expect) and the stock price went up to $0.10 the penny stock investment value of your portfolio would be worth $50,000 (a return of 1000%)

When you are buying penny stocks you need to know what the company is doing to grow. If you don’t, you risks may be more than you willing to take.