Are Penny Stocks Risky?

Most investors prefer to invest in stock market because they know that this is a type of investment that can give them better opportunity to gain profits. However, the stock market is very risky, and if one does not know how to handle certain risks, there is a big possibility that they will lose their investments. This is the reason why stock investors need to know all the possible risks that may encounter, and they also need to make sure that they understand such risks so to find out how to best handle them when they arise. Through this, they can minimize their risk of incurring unnecessary losses.

If the stock market is a risky business, investing in penny stocks is much riskier. Penny stocks are usually companies which have just started with their business, and so they are in need of capital. This is the main reason why their stock is very cheap – at less than $5 per share. Thus, penny stocks are very famous especially among first time investors who do not have big amount of money as capital. You can own several stocks even with a small capital after all, considering the cheap price of penny stocks. Thus, buying penny stocks has become very popular these days.

When to Buy Penny Stocks?

penny stock riskPenny stocks are not traded in major stock market though. They are seen listed in over-the-counter market and pink sheet market and can be purchased through a. The stocks that are listed in pink sheet markets are NOT required to file their financial statements with the Securities and Exchange Commission (SEC), thus they are rather riskier to invest with. Just the like regular-priced stocks, you can buy penny stocks through online trading.

Hiring a reputable penny stock broker is recommended. People who are afraid to invest on their own may opt to hire a full service broker to process their transaction and give them investing advice and stock tips. Full service brokers are reliable as they help investors choose the best stocks to invest with. However, they charge higher commission and service fees, making the investment costs really high.

Those investors who like to save on costs may choose to hire a discount broker instead. Discount brokers charge cheap commissions and fees, though they do not offer investing advice and tips on which stocks are best to invest with at the moment. Thus, the investors who invest through a discount broker must do their own research to find out which are the hottest penny stocks to buy.

To find the best stock brokerage firm, you can review our recommend stock broker list.

How to Find Penny Stocks?

The best news is that we can now easily find the best stocks to buy through the advent of the modern technology — as almost every thing is already available right at the tips of our fingers. All we need to do is browse the internet, join some online forums, subscribe to online stock market newsletters, join some news sites, and browse some stock bulletin boards to find out which stocks are most popular and which are the one preferred by most investors.

Finding the cheapest online broker can also help you easily get started and help you avoid unnecessary fees and chargers some online brokers like to charge.