The idea of investing in the stock market is not new. It is something that people have been doing for many years. There are some people that think it takes a lot of money to invest in stocks. They think that it is only something that the rich can do. They are wrong.
While it is true that buying some stocks is too expensive for the average person. If you don’t have tens of thousands of dollars to invest, it could be difficult to buy the stock of a Fortune 500 company. That is not the only way to invest in stocks. Instead of buying stocks that cost a lot of money, consider buying stocks that sell for a lot less. Penny stocks are stocks require a much smaller investment that is within the reach of most people. If it is done right it is also a way to make thousands of dollars in return.
What are Penny Stocks?
Penny stocks are stocks of small companies that are publicly traded. They have to meet specific characteristics that vary from country to country. In order to be called a penny stock in the United States the stock must:
- Trade for less than $5 per share
- Not be listed on a national exchange
- Meet other specific criteria
- AKA’s – Micro-Cap Stocks, Over-The-Counter (OTC) Stocks, Pink Sheets
For more a deeper dive into what penny stocks are, visit our other article, “What Are Penny Stocks?”
The Basic Strategy
When buying and selling stocks, the basic strategy is the same no matter how much the stocks cost. The strategy is to buy a stock when the price is low and sell it when the price is high. The difference in penny stocks is the volatility of the market and the amount of buying and selling that you have to do.
The stocks that are not penny stocks are often held for long periods of time. The owner of the stocks will wait until they think the price is no longer worth keeping the stock before they sell. They will also look to earn money off of dividends and events such as stock splits.
Penny stocks are not owned long enough to worry about how much of a dividend will be paid. The investors in these stocks are less likely to ride out the fluctuations in price of stocks. It is also important to realize that the money that is made on a penny stock can be much more than most people realize. If you own a stock that trades for $.50, when it goes up a ¼ point, the return on investment is 50%.
The Keys to Making Money on Penny Stocks
There are a few keys to making money on penny stocks. The most important thing is to watch the stock carefully and to make any decisions quickly. A short delay could cost you the money you thought you were going to make.
In order to make money on penny stocks, you need to buy a large volume of stocks. That will give you the biggest financial return. You should also have a system that provides you with alerts if the price of the stock changes, either up or down. If it does change, you need to buy or sell it quickly.
Want more information? Visit our featured article, “The Best Way To Make Money With Penny Stocks.”
It is possible to buy penny stocks without the help of a stock broker. You can find websites that will allow you to make trades. Be careful about the fees that are associated with the service you choose. That could impact the amount you are able to make.
It is possible to make thousands with penny stocks, but it is also possible to lose thousands. Take the time to learn what you are doing before taking the plunge and make sure you pay attention to what is going on in the penny stock market.
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