Cheap Stocks to Buy Now - Try Penny Stocks
If you're looking to buy cheap stocks to buy now why don't you give penny stocks a shot? I know that penny stocks aren't held in the same regards as the major, high volume stocks that you hear so much about. But the truth is, there is way more potential and growth in trading penny stocks, than the stocks that most brokers try to push on their clients.
It's also perfect for the beginner stock trader. A newbie trader most likely doesn't have $30,000 to open a brokerage account, which is probably the minimum you will need to start a halfway decent portfolio. But the great thing about trading cheap stocks like penny stocks, is that you can invest in a nice wide variety of companies that range from a sector to sector without having to have a huge bank account.
The tricky part is deciding on which penny stocks to buy? Well, it doesn't really have to be that difficult. Trading penny stocks is very much like trading any stock on the Dow. You have to look at the same fundamental and technical analysis as you would any company. All the information is there.
There are ways to spot when a penny stock that is ready to explode. If there is enough liquidity in the stock as well as enough price movement, you can see certain patterns that get repeated over and over again. The difficulty is being able to do a large and broad scan of the markets to know when opportunities like that arise.
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Pros and Cons of Investing in Penny Stocks
Typically when you think of trading stocks, the major stock exchanges may come to mind like the New York Stock Exchange (NYSE), the National Association of Securities Dealers Automated Quotations (NASDAQ), and the American Stock Exchange (AMEX). A Penny stock is a low priced security for a very small company with a market capitalization of under $500 million and usually trade in very low volumes. Penny stocks also trade on other "other the counter" exchanges like the OTCBB and Pink Sheets.
Due to the low trading volumes, penny stocks are an investment option that comes with a sizeable amount of risk. According the Securities and Exchange Commission, potential investors in penny stocks should be aware of the fact that due to the low trading volume of these stocks, it is possible that an investor won't find a buyer for their shares. Finding accurate price quotations are also difficult making it a strong possibility that an investor can lose their entire investment.
Penny stocks do carry a certain appeal for many different kinds of investors. Chances are though, a new investor looking for a potentially lucrative investments with a fairly low entry price will run across the penny stock. The allure comes in the fact that at such low prices any changes are often measurable in hundreds of percent in a given day or two. An investor's stock value can literally become worth double or even triple the original investment amount.
Conversely, the price of a penny stock can drop in value just as quickly. New and inexperienced investors would do well to avoid making penny stocks a major part of their investment portfolio. Also due to the low listing requirements on exchanges like OCTBB and Pink Sheets, many companies are not to be considered safe investments. Many of the companies listed on alternative exchanges lack enough financial history to be able to accurately determine if they would make a good investment or not. In some cases, companies that are considered to be penny stocks are either new companies or are in some cases dangerously close to bankruptcy.
Unfortunately, some traders have even taken to artificially manipulating stock prices by buying up large amounts of a stock and then convincing individual investors of the need to buy. Since most of these stocks aren't in such great demand, an investor will have to lower his asking price in order to entice a bidder, oftentimes at a loss.
Not every company that trades for "pennies" should be considered fraudulent. Some are simply small companies trying to grow their business and are working very hard to end up on the larger market exchanges. Wading through the fraudulent companies to find the truly reputable companies capable of helping an investor turn a large profit may not be worth it. Investors with low investment income may be convinced that just one good trade can triple their investment, but in the end an investor is better off choosing an investment from a company that they have researched and are convinced that this company's value will grow in the future.
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Potential in Penny Stocks
Buying penny stocks can have great potential,that can be either good or bad. You can double you initial investment in no time, but lose it just as quick. When I say double or triple your portfolio you may think that it's not easy for that to be done.
Think about it, you have 100 shares of a company (we'll call it XYZ) that are price at $1. That makes your portfolio worth $100. The company has annual revenue at about $100,000.If that company goes ahead and increases their revenue three fold to $300,000 per year. The stock of the company typically will go up about the same percentage. Now your portfolio is worth $300
For small companies to increase by large percentages, it won't take much for that to happen. A new contract from the military can do that (like what happen to MMGW). For Exxon-Mobil to do that they would have to increase annual revenue by over $7 billion.
Penny stocks are very attractive to most amateur traders. That could be because of the "cheapness" of the stocks. You can buy 5000 shares for as little as $50. More Google searches are done for penny stocks than blue-chips and dividend paying stocks combined. It's amazing to see that more people would want to trade penny stocks than trade commodity stocks. the volatility is just as active, but with penny stocks, you're dealing with companies that have no proven track record for the long haul.
The average "Joe's" of america want to hit it big. They want to hit the lottery and buying penny stocks gives them that same Trading in the stock market when your emotions are involved can only lead to poor decisions.
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