![]() ![]() Seek penny stocks that trade at around 100,000 shares a day.You can find this information from several sources such as the company website, the SEC and reliable sites that track stock performance. Take a look at the company’s history and the reputations of those who manage it. Study the competition and the industry sector the company operates in.Dig into the company’s earnings, profits, expenses and as many other details about its financials as you can find: Do Your Homework Before Investingīefore you invest in a company’s stock, you should supplement your overall understanding of stocks by learning as much as you can about the company. If you feel you have the stomach and risk tolerance to dive into the world of penny stocks, there are several approaches to doing it the right way. Some companies with penny stocks have promising potential, and others that seem to be in bad shape could be looking at major comebacks. However, that doesn’t mean every penny stock is steeped in schemes. If you can’t find anything about the company’s earnings and other crucial financial information, you probably want to keep your money away from that firm. With that said, it’s not surprising why certain companies may want to keep their financials hidden from potential investors. Some companies selling penny stocks are either struggling or facing legal trouble. This makes it hard to research a company, which is an essential part of investing wisely. Securities and Exchange Commission (SEC). For instance, many companies with penny stocks don’t even have to report their financials or register with the U.S. This means companies with penny stocks don’t need to follow the same strict rules as companies listed on the big exchanges. Moreover, penny stocks exist on the over-the-counter (OTC) market rather than large stock exchanges like the Nasdaq or the New York Stock Exchange (NYSE). This move eventually causes the price of the stock to plummet. When the rise in demand elevates the stock price, traders sell the undervalued stocks for a profit. They then hype up, or “pump,” the potential value of the stock to get inexperienced investors excited. When this happens, traders purchase stocks at very low prices. Over-promotion of penny stocks may signal a “pump-and-dump” scheme. Oftentimes, these promoters hype up the stock and their company’s capacity for success. ![]() They reach out to potential investors through emails, newsletters and cold calls. Many companies that are listed as penny stocks hire promoters to sell these stocks. Sound too good to be true? You have to be careful, of course, given the sizable risks associated with this type of investment. If you sell at this time, you’ll make $7,000, more than doubling your money. Say you purchase 10,000 shares of a stock at 30 cents per share and the price then goes up to $1 per share. Shares of penny stocks are investments in companies that usually trade for less than $5 per share. ![]()
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