Penny stocks are stocks that trade below the dollar threshold. These stocks can be highly volatile, but given the right circumstances, they can also be a good way to make some extra money.
Most penny stocks do not trade on any of the major indexes and instead trade in over-the-counter markets. It would be helpful to obtain a publication that provides a major stock index such as the Wall Street Journal, Barrons or Investors Business Daily.
Research the companies of the stocks that are trading below the dollar. Use tools such as Yahoo! Finance, Google Finance or CNN Money. Don’t focus on the earnings growth as many of these types of stocks haven’t earned any profits. Try to search for reports promising better things to come for the company that sparks your interest.
Keep your exposure to investing in penny stocks small. Calculate your total investment spending and only devote a small percentage of that to penny stocks. This can help protect you in the event of a loss but also give you the opportunity to make a profit.
Get in touch with mutual fund companies and ask for their portfolios of penny stocks. Using a mutual fund to invest can help reduce your overall risk. Completing a mutual fund application will get you on your way to penny stock investing.
Open an online trading account with a company such as eTrade or Fidelity to find the best penny stocks online. Type the symbols for the penny stocks you want to purchase and the number of shares you want to purchase. View the total cost and ensure you have enough funds available to make the purchase.