What Are Penny Stocks And How Do They Work?

By Matthew I Arthur

You might have heard a lot of people talking about penny stocks, and by investing in these stocks they were able to gain huge returns. You might be interested in investing in penny stocks to double your money fast. But, before blindly investing in penny stocks, it is very important for you to clearly understand what these stocks are, and how you can invest in them wisely, so that you can make a lot of money through this simple investment.

Introduction To Penny Stocks

The general description or feeling about penny stocks, is that it is a stock that trades for under $1. But, this is not the true definition of a penny stock. They are trading stocks on the stock market, and the biggest difference that you would see in the penny stocks and the blue chip company stocks is in the price of the stocks. Penny stocks are simply share prices of the smaller companies, small technology firms, mining companies and start up companies. The price per share of such smaller companies is very low when compared to multinational companies. Many people interested in doing stock trading invest their hard earned money in these kinds of stocks. All you need is a few hundred dollars to get started with a batch of developing pennies.

Is There Benefit In Investing in Penny Stocks?

Once you get to know what penny stocks are all about, the very next question that would come to your mind is the benefit that you will be able to gain by investing a small amount of money in the shares of small companies. Well, the best thing about these small stocks is that if it experiences a move in the price, this move will often be a huge and dramatic one in terms of percentage. If you are looking to gain good revenue through your investments, then you need to be working the percentages and investing in penny stocks that have a good chance of gaining in percentages.

Best Way To Start Investing

If you have a chat with leading financial experts and stock brokers, then they will all vouch that investing in penny stocks is the best way to step into the world of stock investments, solely for the purpose of learning. You will be learning the tricks of the trade of stocks and shares by investing in penny shares. They are the cheapest way of investing in stocks as you might even find certain stocks that are valued at 40 to 60 cents and you can even invest in hundreds or thousands of shares without needing to break the bank. You can also learn the nuances of stock trading through these tiny stock investments.

Never Worry About Cheap Stocks

The thought that you are trading in cheap stocks should never ever strike your mind when you are trading in shares. These lesser valued investments can change the fate of your life in the shortest possible time as any one of them can easily skyrocket in value very soon. As there are only a few traders who will be investing in these types of stocks due to its cheap value, there is every possibility for it to double, triple or even go up four times its initial value in a space of a few hours, or even sometimes in a few minutes time.

There's Also A Risk Factor

If you can make huge gains from penny stocks, the other side of it is that you could also lose all your money on a cheap stock that you have bet on. There is risk involved in any kind of investment, let alone pink sheet stock investments. Hence, if you are interested in trading in these stocks the safe way, then you need to depend heavily on analytical micro stock choosers. They are the perfect stock pickers who will be able to easily anticipate the behavior of the stock market and their main target is only the cheap stocks.

Invest With Caution

Even though penny stocks offer a large chunk of profits, these shares are quite vulnerable to be manipulated. If you are not very careful and cautious in picking out the right stocks, you can easily lose all your money that you had invested. It is important for you to find the honest and real small organizations to invest your money, as such investments will offer you tons of potential to earn handsomely. If a company seems to be having a bright future and is a promising small organization, then you can very well invest in their small stocks to get a hefty return on your investments. All you need to do is to take time to do research on the internet to spot such promising companies and you are sure to gain good payouts.

Tips To Invest In Penny Stocks

The following are the tips that you can use when you are thinking of penny stock investments.

• Do thorough research and proper planning before investing in pink sheet stocks of a company.
• Start out with small investments and slowly increase your investments on penny stocks.
• Invest in companies that have huge average trade volume.
• As penny stocks are highly volatile, always have an entry and exit plan ready and stick to that plan always.

Advantages

• Trading in penny stocks will be your guide to learning about the stock markets and how they perform.
• It is very easy to start penny stock trading as you do not need to put in a lot of investment.
• You have the opportunity to make more money in the shortest possible time by investing in mini stocks.
• These micro shares can also grow up to be traded in the stock market as mid cap stocks, thereby multiplying its value many times.

What I Think

It is important for you to invest in micro stocks with a little bit of caution and thorough planning. Make sure that you do not invest in stocks of companies that often go up and down, and this is especially important for anyone who is new to small stock trading.

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Article Source: http://EzineArticles.com/?expert=Matthew_I_Arthur

2014 Investment in Pennies

By Shawna Frost

You don't need a lot of money to start investing in penny shares in 2014 - but they could make you a potential fortune in less than 12 months...

Penny stock is the only stock class with the power to double your investment, virtually overnight. You don't need to pile tens of thousands into big, expensive stocks like Apple or Exxon to make serious money investing. Many investors who have been successfully investing for over 30 years, say they would not touch lumbering blue-chips with a barge pole. As they believe the best, and most rewarding, way to make money investing is with "penny stocks... "

What makes penny stocks different from other "normal" stocks is that they're cheap. Dirt cheap. Shares can go for as little as half a penny to a few pounds. So even small (or first time) investors can afford to play the market. And don't worry if you've never bought a stock before, it's as simple as checking your email (or making a quick phone call). Anyone can do it.

Rarely featured in the press and "off limits" to most investors, because the big fund managers can't trade them...

Better still, these stocks can deliver truly explosive gains. In fact, they're potentially the most profitable stocks on the US and UK market.

With a big "blue chip" stock it can take years for a $50 share to turn into $100. But with a penny stock, a 20 cent share can become 40 cent overnight. After all, the share price only has to go up by 20 cents!

So with penny stocks you could potentially double your money at lightning speed.

Proven to Outperform Bigger Stocks

The little Known Story of a Penny Stock Billionaire...

In 1939 a young trader called John Templeton bought 100 shares of every company trading under $1 per share. Four years later he had multiplied his money many times over - even though some of the companies he invested in went bankrupt. This is the profitability of penny stocks.

John retired a billionaire, and lived out the rest of his days in the sunny, carefree Bahamas. And renowned investment researcher Roger Ibbotson points out that - "[penny stocks] have outperformed large-cap stocks... over the last 80 years." Eighty years.

As you can see, penny shares have trounced blue-chips for well over half a century. But most investors have no idea of the colossal power of penny shares. It's somewhat of an industry secret, one I'm letting you in on today.

This chart is a reminder of why I love small caps so much. They have consistently beaten the UK market since 1955.

So you see, when it comes to share dealing, I believe there's only ONE way to make serious money. I'm not saying that you're guaranteed anything. I'm saying you have a chance - a genuine chance - of making some real money.

So why Isn't Everyone Doing This?

If penny traits are so great, you'd expect everyone to harness their amazing profit building potential and get rich. But that's not the case at all. You see penny stocks are so small; the "big boys" in the City can't trade them.

This is because big investment firms can buy up millions of shares at a time... but if the company they buy into is a penny trait, the share price flies through the roof with a big order.

Penny shares have outperformed blue-chips, every single year, for the past 57 years

This immediately cuts into their potential profits, so penny investments just aren't a sensible way to play the market, when you're a City fat cat. However they're great for the little guy and first time investors.

Why you won't find these tips in the mainstream media

Because the City ignores them, the mainstream media does too. This is why most people don't know about penny stocks, or just don't trust them. Because they don't get the same media attention big blue chip stocks like Pfizer and Barclays do.

But just because penny traits aren't mentioned on the news or some bobble head's TV show, doesn't mean there's anything wrong with them. In fact it's better this way...

If you're willing to invest some spare cash you aren't depending on in penny shares, I really believe you'll be better positioned to profit. Of course, penny shares are riskier than investing big name companies. But with bigger risks comes the chance of much bigger rewards...

Shawna Frost works as a Financial Analyst with some good US Stock Exchange Consultancy companies. She writes about Penny Stock tips,Stock Market Tips and shares her experience regarding the Hot Stock Tips and US Stock Exchange tips with the readers.

Article Source: http://EzineArticles.com/?expert=Shawna_Frost