Penny Stock Investing - A Quick Guideline

If you are one of the many people considering penny stock investing as a way to earn capital from the equity markets, you must first get up to speed on the penny stock market. These stocks are not your normal investment instruments like their big board cousins trading on the larger exchanges like the NYSE and NASDAQ. These stocks are penny stocks for a reason, to be sure. Most are companies with nothing more than an idea or a product in research and development with potential to possibly make it to market some time in the future. While others have viable products or services and are waiting to possible be taken over by a larger company that has the muscle to market the smaller company’s product on a much larger scale.

In a word, penny stocks are speculative in nature and really aren’t suited to novice investors who don’t have much market experience. Penny stock investing is ideally best suited for the experienced investor with a clear understanding of the OTCBB and Pink Sheets markets. However, it goes without saying, huge gains can be made in the penny stock market and investors can experience a total loss to their investing account. It happens and you need to know the possibility exist that you could lose your entire investment speculating in the penny stock market.

How Do New Penny Stock Investors Find Stocks To Invest In?

In most cases, new penny stock investors find their way to the Internet and financial message boards which are prevalent on the Internet. Before you dive into the message board sub-cultural, you should be aware there are many people that post on these boards for various reasons and most have their own agenda. Beware the hype! Promoters are everywhere on message boards and are paid to tout certain stocks. Promotion by design is not a bad thing. Promotion is used everyday in various forms from commercials to flyers handed out on the street corner. It is nothing more than advertisement.

However, when a penny stock promotion takes on the nature of bait and switch or a ponzi scheme, well this is dishonest and illegal. The SEC frowns on and prosecutes people that use illegal means to tout stocks. All promoter must use a disclaimer disclosing that they are acting on behalf of the company or firm that is paying them and they must disclose how much they are being paid to promote a stock. Just remember when you visit message boards in your search for hot penny stocks for building your list of penny stock with potential, to take what you read with a grain of salt. Just be shrewd and do your own research before investing your hard earned money in any penny stock posted on the penny stock message boards.

Get Proficient At Reading Penny Stock Filings

Publicly traded companies are required to be transparent and file reports with the SEC on time. These reports can mean the difference between investing in a good penny stock and a bad penny stock. Teach yourself how to read these important reports as they provide a wealth of information. LEARN TO READ AND UNDERSTAND THEM! Filings list every going concern associated with the company. Everything from potential new products to pending lawsuits against the company.

Finding hot sectors is another way to locate good penny stocks. For example, if oil is reaching new highs with the possibility of going higher, oil penny stocks will very often move with the larger markets as the market moves higher. This is just one example of how to find possible hot penny stocks to invest in and make money.

Penny stock investing is requires a certain amount of discipline and experience to become successful. Before risking your hard earned money on worthless stocks, take the time to learn the basics of the stock markets, their dynamics and most importantly, how the penny stock market reacts to these dynamics.