Penny Stock Investing
Penny stock investments are those kinds of investments where you are trading in shares below $5. Although everything below that margin is included in that title, penny stocks often cost less than $ 1, which brings them closer to their name. These extremely low prices of shares allow investors to control numerous small shares of a given company with a minimal investment capital demand.
Penny stock investment is generally viewed as a low risk investment opportunity. The profits are small, but multiplied by the vast number of shares one may possess they can rise to substantial amounts. The testimony to this is the fact that many experienced and successful investors turn to penny stock investment even when they are very well off.
This low price of penny stocks is also the hook for beginner investors, as it offers you to enter the investment world with little to none capital.
The main allure however is the obviously ideal setting, where you would get the chance to buy a large amount of stock from a company which is on the decline, losing their business, and selling their stock at much cheaper prices than they are actually worth. Then later, in this ideal scenario, the company would get back on its feet again, returning the price of its shares to its original prices and you as a proud owner of a large now very valuable amount of shares would prosper greatly. Although this scenario is the basis for the entire system, it rarely happens in this form, ever.
It is also very important to know that those cheap shares can fall even cheaper, so you would not only need to predict the potential resurrection of that company, but the precise moment when the shares will stop dropping down, so you can purchase them at the cheapest prices possible.
But, in the reality of the whole situation, there are numerous things one must consider and calculate, before seeking a penny stock investment profit opportunity, such as the liquidity of the shares, bid-ask spreads, market capitalization, and such.
Penny Stock Brokers
First of all, in order to enter the penny stock investing world, you need to find a good penny stock broker. Now, those brokers do not work for free and usually have their own fee structure or commission on a per-share basis, so you must calculate that in your plan.
The logical choice would be to go for brokers that charge on a per-share basis if you are investing in a small number of big shares, and vice versa.
Choosing a good Brokerage
After that, you must get familiar with the top government-regulated penny stock brokerages and their workings.
In the U.S. for instance, the top brokerages include: ChoiceTrade, Charles Schwab Corp, Interactive Brokers, Scottrade, TDAmeritrade, etc…
A good brokerage must have its own online and mobile trading platform, and a Depot and Nostro facility. A depot is a dematerialized account where an investor keeps his shares, while a Nostro account is the investors’ bank account.
After you’ve gotten familiar with the basics, there are a lot more aspects you need to learn to follow and literally feel, in order to be successful in this investment business. It’s everyman’s game, but not everyone is guaranteed to win.