Penny Stock Egg Head
Penny Stock Egghead is what? We'll get to that, but first lets get educated...
What are Penny Stocks?
In short, penny stocks are any shares of stock that trade for $5 per
share or less. Often times these stocks are offered from smaller
unproven companies that usually trade only a few thousand shares per
day. Many new investors may decide to test the market out with penny
stocks because as they sound, they are low-priced and can be a great
starting point. Penny stocks are considered very risky by some because
they are usually offered from small companies that have no real history
and thus can be difficult to locate information for making solid
decisions. On the flip side of this, because these companies are not as
familiar to the public as blue chip stocks (well know and proven
companies i.e. Walmart) might be, they can often be acquired at bargain
prices and can sometimes realize gains in the hundreds or thousands of
percentage points.
Where do they trade?
There are many places penny stocks may trade and some are better than
others. When considering buying penny stocks, one must decide if the
market they are being offered in fits with their risk tolerance for
investing. The 4 main exchanges and probably the safest ones include:
NASDAQ SmallCap
Over the counter bulletin board (OTC-BB)
AMEX
Canadian Market
NASDAQ SmallCap- Companies within the category must remain in compliance
and have strict reporting requirements. This means good visibility and
easy access to company data.
Over the counter bulletin board (OCT-BB)- This exchange is basically for
any securities that do not fall under NASDAQ or any other National
Exchange. Since it is owned by the NASDAQ, it is highly regulated and
offers over 3,000 securities with real-time information regarding price
and volume.
AMEX- The American Stock Exchange is very similar to the NASDAQ SmallCap
in regards to visibility and obtaining company data. The real
difference is the AMEX trades less volume shares per day than does the
NASDAQ.
Canadian Market- The Toronto Securities Exchange (TSX) has a very large
selection of penny stocks to choose from and functions very similar to
NASDAQ SmallCap and AMEX.
The aforementioned markets are not the only way to trade penny stocks,
but they may be the safest. Some of the other ways to obtain Penny
stocks include:
Pink Sheets
Buying Straight from companies
Buying directly over the phone
Although you may avoid the commissions associated with brokers when
using these 3 methods, they are much more risky for several reasons.
Lack of reporting/regulation requirements, virtually no company
information to base decisions on, and difficulty in buying and selling
make these methods less viable for most investors.
So think you may be interested in purchasing some penny stocks and are
curious how to go about it? Here are few options for beginning in penny
stocks:
Since I recommend using one of the 4 previously mentioned safer markets
to invest in, you will need a broker to buy and sell shares on your
behalf. They can either be discount brokers or full-service brokers.
Discount-brokers are usually the best option since most new penny stock
investors will probably have minimal starting capital to invest with.
Many discount brokers offer online trading services which automate the
process and allow them to charge rates as low as $5 per trade.
Full service brokers are great if you like personal face time but often
cost quite a lot more than discount brokers. Unlike discount brokers,
they will often times make suggestions and offer their investment ideas
to their clients.
Alright so you know what penny stocks are, where they trade, and types a
brokers. One of the last things to consider is whether you want to do
all of the research yourself or pay for someones' expert advice. If you
decide you enjoy researching the markets and reading the ends and outs
of company profile to get a read on the latest penny stock you feel is
getting ready to explode, then have at it. If on the other hand you
would rather hire someone to bring you their hot picks weekly and save
you loads of time, then paid services may be more for you. There are
many of these companies out there and I would suggest you do your
homework if you are going to go this route. If you are looking to find a
place to start that will not break the bank, the Penny Stock Egghead
program offers hot weekly stock picks for a one time (life time)
membership fee of only $97. This course allows you to paper trade for 8
weeks (using play money) and follow their stock picks along to see if
they would have made you money once you have taken the plunge with real
dollars.
Hope you learned something about Penny stocks you may have not known.
Remember to educate yourself before jumping in... and that jumping in is
the only real way to learn anything. Happy investing.
