So you want to start investing in stocks? If this is you, then you don’t have to look any further. With a huge variety of different penny stocks out there, the value of investing in them has never been better than now.
However, the process of learning how to invest in penny stocks, as well as finding ways to find the best penny stock brokers; can be extremely daunting, as the market today is already over-saturated with them. That said, we are here to help you out manage everything related to this topic: from explaining just what penny stocks are, to 5 ways to find the best penny stock broker, we got you covered. Let’s start investing!
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1. What Are Penny Stocks?
First, it is important to know exactly what penny stocks are, in order to move forward with investment. As the title puts it, just what are penny stocks? Simply stated, they are stocks (a share in a company’s ownership) that are valued at less than $1 (although now they have been raised to be considered at $5). They tend to be new, growing companies that have not received attention from investors, and don’t have many resources to work from yet, since they’re still developing in the market.
2. How To Invest In Penny Stocks
The process of starting up is fairly simple, if you follow these instructions:
- Open your account. Find a good penny stock broker; doing so is important to the kinds of stocks you end up investing in, as well as benefitting from. That said, choose a penny stock broker that specializes in the area that you want to invest in (e.g. cosmetics, engineering, etc.) and then look up the fee policy; the lower the flat rate, the less you will lose.
- Look for penny stocks. With a quick, simple search online, you will be able to find lists of different penny stocks to choose from. Major stock exchanges such as NASDAQ and NYSE tend to feature stocks that have bidding prices over $1, so you will need to turn to places such as the Over-the-Counter Market (OTC) to find penny stocks.
- Choose your penny stocks. Now, it is a matter of selecting the top penny stocks to invest in. You are essentially encouraged to choose those based on your interests while also considering the risk tolerance when it comes to putting money in. Create a list of your top contenders, writing down the company, the sector, and the investment price.
- Be aware of the risks. Like any other stocks out there, investing in penny stocks can be quite risky. Compared with major stock companies, penny stocks are especially a volatile market, since they are small and just starting up, without having the supply and demand yet to make monetary returns. As a result, it is necessary to be cautious when it comes to putting in money, since penny stock investments are not for everyone and not all can be successful at it.
3. 5 Ways To Find The Best Penny Stock Broker
As already mentioned in the previous point, it’s important to find a good penny stock broker in order to not only invest successfully, but also safely. When deciding on doing it, take note of these ways to find the best penny stock broker:
- Know the fees. Like with any account set-up, there will be a minimum amount to get started. You should also know the commission fees and rates that are required to maintain your account, and of course don’t be afraid to say “no” if the stock broker is not the right fit for you.
- Speed of trade. Especially in this type of business, it is important to be fast and effective in getting things done. The penny stock market is constantly changing, more so than its major counterparts, so it is imperative to react quickly to such changes. In this instance, the speed of trade will affect how soon you can pocket that money in no time.
- Easy to use. The process should be relatively simple and straightforward, whether it is a matter of operating your account or consulting with your penny stock broker. If it is obscure or difficult to navigate to begin with, then that broker is most likely not for you.
- Customer service. Your relationship with your stock broker should be pleasant, but also transparent and efficient, not to forget professional. Having bad customer service does not make up for good money returns, no matter how good they are.
- Client base size. Be wary of small client bases for a penny stock broker, since reviews will be few and far in-between; as a result, you can’t accurately know if it’s worth investing or not with it. Finding a larger client base size will be a better guarantee of your investment in the stocks.
4. The Best Penny Stock Brokers
Giving you the best penny stock broker out there is not possible, as there are too many good ones to list. Instead, we are here not to provide you with the best penny stock broker, but rather the top 5 for you to consider. In this list, we evaluate their aspects and tell you why they are of quality for your investment, as well as how they compare to each other.
- Etrade. This penny stock broker has been touted for its 60-day free trade offer, and only requires a $1000 minimum for a cash account installment. It is excellent for trading overseas, and has been cited with providing good, efficient customer service to its clients. However, it is better for those who only do trade a few times a year, rather than frequently.
- Charles Schwab. Its account minimum set-up is $1000 similar to that of Etrade, but Charles Schwab also offers benefits with a promotion of 500 commission-free trades by having a deposit of $100,000 or more. Yet, it is a matter of having that amount of money to reap the rewards, and not every investor can initially afford that.
- TD Ameritrade. With no monthly fees or maintenance and inactivity fees, TD Ameritrade has been considered one of the top brokers out there for penny stocks. It also does not require a minimum account balance when setting up. Their online platform is easy and straightforward to use, and it also provides plenty of tutorials to guide you along. Commission fees, though, are considerably higher compared with other companies’.
- Merrill Edge. With a low, flat commission rate, Merrill Edge is a good tool to invest in, as well as gives a promotion of cash bonuses for every deposit you make into your account. However, its account minimum of $25,000 is significantly more than other penny stock broker’s, which might put many starting investors off.
- Suretrader. It offers a low account minimum at $2000. It is also one of the cheapest broker companies, which is good for young investors who do not have as much money to start with. There is a no-pattern day trade rule, and provides great borrows for all sorts of penny stocks, although the only downside is that it requires paying a premium to reserve hard penny stocks.
5. Penny Stocks To Buy Now
Now that you have gotten your penny stock broker, it is time to start investing! You might have an idea of which sector(s) to go for, such as technology, health care, consumer goods, and many more. However, if you’re still in the dark about it, we have a list of the top 5 penny stocks to buy now:
- Clean Diesel Technologies. With a +83.34% year-to-date (YTD) performance, Clean Diesel Technologies is certainly picking up the pace with its recent trading sessions. It provides advanced emission control technology to car manufacturers, and was selected by Honda Motor Co. to do so for its upcoming car model. This penny stock has experienced an incredible 300% increase within the span of a week, and is expected to keep on climbing in the next few quarters.
- Golden Minerals Co. This particular penny stock is reaching its breakout point, as recent trends have shown it rising closer and closer to the major trend line of many big stock companies. Only time will tell how it turns out in the end, but so far, success looks promising.
- Lightbridge Corp. With a strong surge and recent pullback, this company is once again back in control. It demonstrates that a trend line can influence price and how it can get close to reaching that mark, which signals a reversal for the success of the stock. Lightbridge Corp. is a promising company that looks to benefit as a success story.
- Sirius XM Holdings, Inc. Up almost 12% in the past year, Sirius XM Holdings is a strong contender in the penny stock market. As an entertainment company that broadcasts music, sports, traffic, and news, its recent surge even over the last three months has been looked on as favorable for investors.
- Amarin Corporation plc. A biopharmaceutical company that develops and sells medicine to treat cardiovascular diseases, Amarin Corporation has received an upsurge, after running into a bit of trouble with a lawsuit over one of its drugs in 2012. Four years later, and its stock looks to be getting back on track, increasingly rapidly over the past few months.
6. Penny Stocks To Watch Out For
With numerous penny stocks in the market to choose from, it is also not such a bad idea to consider other up-and-coming stocks to invest in. We provide you in this list 5 penny stocks to watch out for in the upcoming quarters:
- Curis, Inc. Specialized in producing and marketing drugs to treat cancers, this biotech company has in recent years experienced a notable surge in revenue, from $3.3 million to $5.9 million between the second quarters of 2014 and 2015. Although Curis, Inc. is still developing and testing out its products, its stock has nevertheless shot up by 74% in its year-to-date evaluation.
- Cincinnati Bell, Inc. This company has experienced considerable profit just over this past year, with a 32% increase in revenue from its Fioptics segment (which provides customers with high-speed Internet service and other communication goods) in 2015, and 20% so far this year. Its stock price has increased to 5% year-to-date, and is expected to keep growing within the Cincinnati region, perhaps even beyond.
- Groupon, Inc. Known for providing discounts to businesses and consumers, Groupon, Inc. is one of the very few big companies out there who has a trade of under $5. At $4.21 per stock, it has revenue of $738.4 million, and could be up by as much as 11% in the following year. With more than 500 markets all over the world, Groupon, Inc. just might be the contender on this list of penny stocks to look out for soon.
- Avon Products, Inc. You are probably familiar with this company’s beauty and fashion products, but you might also be surprised to know that its net income is back up again at $30.0 million, compared with $20.0 million from the second quarter in 2014. With its direct-selling policy and sales operation in sixty countries, it looks as if Avon Products, Inc. has everything going for it.
- Geron Corporation. Just like Curis, Inc., Geron Corporation also makes and promotes medicine used to fight against cancer. Although a decline last year had significantly hurt its revenue, the company has been working hard to recover from what they lost; in fact, they experienced a 20% increase in its share price, after it had published two papers in The New England Journal of Medicine that revealed a scientific breakthrough in its research.
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Finally, now that you are considered an expert in the process of starting, investing, and benefitting from the penny stock market, it is now time for you to go out and try your hand at it! While it is true that putting in money for new, emerging companies can be a risky business, you will also be rewarded from it once they become successful in the stock market. That is why it is important to do your research, find the best stock broker that specializes in penny stocks, carefully choose which stocks to invest in, and watch what happens from then on. Who knows? You just might be the next self-made success story!