How can you make money buying penny stocks? More importantly, how do you which are the best penny stock to buy? These are questions that many investors have who have little to no experience in investing in penny stocks. There are basic criteria used in attempting to understand penny stocks and to know the best ones to buy.
Know the historical performance of the stock. This means that you have to research the stock carefully before making any type of investment. There are many online resources that provide information on which penny stocks to buy. A personal favorite is Motley Fool.com which provides accurate, easy to read information that will assist you in your decision on which stocks to purchase.
Determine your risk tolerance. How much are you willing or able to invest will determine which penny stocks are the best option for you. One common characteristic of penny stocks is they are high risk/high reward investments. If you're an aggressive minded investor who is willing to take a risk then penny stocks are definitely a good option for you. However, conservative investors should really think twice about their investment choices before investing.
Find the right investment broker. I would suggest using an online discount broker for investing in penny stocks. The reason is penny stock investments can only amount to a couple of hundred dollars and you don't want the broker commissions to exceed your investment returns. One suggestion would be E-TRADE. Com. They are a reputable, inexpensive online broker that has an excellent reputation.
Penny stocks can be very unpredictable. It's easy to lose money on penny stocks. However, they can also produce hundreds of percentage points in a short period of time resulting in significant gains. Statistics have proven that with timely planning and research, the right penny stocks can provide a substantial return on your investment.