INVEST ONLINE IN PENNY STOCKS
Penny stocks â€“ is a mere get-at-able online/offline investment opportunity. Penny stocks is a high risky and not so profitable as HYIP investments, Forex or stock trading. Understanding the risks and the potential for losing your entire investment will allow you to make better decisions regarding most speculative stocks.
Except for corporations with capitalization in the hundreds of millions, there are daunting number of smaller farsighted companies with much more less market capitalization. These companies do little operations and are more risky, trading at only a fraction of the price of their much large counterparts. And these are morbid penny stocks. The price per share of such companies is no higher than $5. Because of this, even penny moves can mean a great return for an investor because of the higher volatility levels.
Micro-caps (small/micro/nano-cap stocks are shares of pint-size companies) can provide outstanding diversification to your portfolio and can easily jump 20-30% in a single day and some lucky traders were positioned to generate profits from 100% to 750%! This asset class typically has very low correlations with other U.S. equity classes as well as low correlations with international equity and fixed-income securities. Usually traded on the NYSE, Amex, Nasdaq, OTC-BB, but mainly on Pink Sheets. To estimate the market capitalization of a company (the market cap) you must multiply the stock price of the company by the amount of shares that are outstanding.
The pink sheets were named so, as they were actually printed on pink paper. You can define them by stock symbol ending - ".PK". The pink sheets are also known as an over-the-counter (OTC). The market that electronically connects broker-dealers, who carry inventories of securities to facilitate the buy and sell orders of investors.
There is no central trading floor (as stock exchange like the NYSE own), all quotations are done in an electronic way. And since that is so, the pink sheets-listed companies are not required to be listed to the fullest extent, unlike companies presented on national stock exchanges. The only thing that company needs to fulfill is a form, entitled Form 211, with the OTC Compliance Unit. Another peculiarity of pink sheets is that companies which trade their stocks on major exchanges, must maintain set-up of minimum amounts of net assets and minimum numbers of shareholders in order to preserve their place in listings. Companies on the OTCBB (OTC Bulletin Board) or the pink sheets, do not have any minimum standards.
HOW TO BUY PENNY STOCKS?
It is expressly easy to buy penny stocks. The only thing you need to do is to choose a broker and to open an account. The significant tip to notice is that, if you want a lot of money to be invested, make sure to use services of broker with smaller fees. But be careful to only risk as much money as you are prepared to lose (as in HYIP industry do not immolate all your money holdings). There is no locked price on penny stocks which are bought and sold, but rather there are a number of prices. The difference between the bid and ask price is known as the spread. The spread of many penny stocks are usually around 25-33% but can often be 50-100% or even more. There are also always two bid and two ask prices, these are known as the inside and outside bid and ask. The outside is of the most interest. Penny stocks are also subject of rising the initial price. This is where a broker has held the penny stock in its account and has therefore taken some of the risk connected with market prices backing and filling.
To take the bark off penny stocks, it is worth saying that investors have to be aware of companies that are not usually covered by analysts. If you read financial papers or watch expressly financial shows, you must know that they seldom cover a company that is not listed on a major exchange. So dormancy is not the right condition while investing into penny stocks. And requires a lot more due diligence on the investor to spot the lay of the land. Of course, that information surely makes no profits in the end, so research penny stocks. Read online newsletters, forums and bulletin boards to discover what other investors are saying about specific penny stocks.
Ask your online broker for recommendations, cause since many sub $5 companies are seldom traded, and especially those that trade for fractions, they are targets for price manipulation and mother lode for scammers. For instance, a private person or any organization buys millions of shares. Then using scam methods like Web sites, blank press releases, and e-mailing starts to attract investors to the company. The increased demand pushes the price upward, while the original individual or organization doing the "pumping" sells their holdings.
Very often, faulty or misleading information is provided, resulting in investors buying shares in the underlying company.
Scam artists often claim that an OTCBB company is a Nasdaq company, but this is misleading; it suggests that a company is larger and more liquid than it probably is.
HOW TO INVEST BETTER
To set the stage for future investments we all know that good information is an investor`s best defense when purchasing shares in any company, but accurate information on micro-cap stocks can be hard to come by. So the advantage is in analyzing a small company than a large one, and fewer published reports means an investor must do more original research. The result, however, is that micro-cap stocks often don`t trade at their full values, creating a price inefficiency from which savvy investors can benefit. Another technique is to find a company once being strong, but has beaten down. If a company was once listed on a major exchange like the NYSE, but has been delisted (usually a company is delisted cause it no longer can meet certain requirements). An investor could buy shares of that company with the hope it could make a comeback.
Be very wary of brokers who are only trying to sell stocks and do not care about your interests. Before penny stocks appeared online, brokers were authorized to "abuse" with discretions, on the reason they owned the whole information about the stocks, but nowadays everything seems to be more transparent.
www.pennystock.com - The only penny stock site recommended by both Barron`s and Forbes.
Also, the important thing is not to play down the fact that penny stocks may trade infrequently. When a stock is thinly traded, the chances of getting out without driving the price down are low. No matter what the market, if you can`t find a buyer, you won`t get out of your position, But this can be warned by not buying stocks that have low trading volume.
Penny stock is highly volatile. There was a magnifique example of straight off explosive profits from San West Inc. which uptrend has raised up to 750%! That was by far the most active stock (by number of trades) in the small cap market! The broker of the deal picked shares up at around 20 cents on low volume. Than sold to investors on around $0.52 and suddenly it shot up to an intraday high of $1.70 within days!