Penny Stocks 101

Penny Stocks 101

We know what it is like to be new to the trading world and Jason Hartman is here to help. Trying to make heads or tails of the stock trading mumbo-jumbo can be difficult. Penny stocks must be handled with care, much like dynamite. One bad piece of news or a bump on the road can mean the difference between great profits and immense losses. Knowledge and education therefore becomes important trading in this world.

Penny stocks are those with value per share less than $5. Volatility seems to be common with these companies, which is why thrill seeking traders like them. Diversifying your portfolio is always a good idea, and many experts would agree that having a high percentage of penny stocks is frowned upon. Penny stocks are great if you have some money that you can risk and lose, but hopefully, with some tips, it will not come to that.

Learn about the company that you are seeking to invest in. Look at their previous reports to see how they are doing. Are they posting losses when other companies in the same field are making profits? Stay away from this stock if this is the case. Following the company closely for any turnaround would be ideal, but do not buy into the stock when it is facing catastrophe. It is like a good rental property, there are plenty of them out there, so do not focus just on one.

Find out what experts are recommending to buy. Looking for information and doing your own research is never going to lead you astray. There is a reason why these people are called “experts”, they live and breathe for these companies and therefore it is good to see what they have to say. Take anything with a grain of salt though, as it is impossible to predict the future when it comes to stocks.

Look into stocks that you share a passion for, this way you will know what is good and what is bad. This is essential for successful trading, as the research will not be as exhausting and you will enjoy what you are reading. Ask yourself this question, would I feel comfortable with the way management is handling business? If management is increasingly pushing back release dates or looking out for themselves with every decision they make, chances are that they do not have a company worth investing in. Peek at the percentage of the stock that is company owned, as a large number in this category means that workers as well as management believe in what they are doing.

Treat penny stocks with care, as they can be a great opportunity to make a profit but they can also eat away your investment quickly. Do not invest money that you are not willing to lose, as the stock market is riddled with surprises. Do not shy away from penny stocks, as their volatility can work well to your advantage. Lastly, do not hesitate to ask for help, there are plenty of brokers that are there to help customers make the best decisions. Following

these simple tricks can get you to making some profits in
no time. (Top image: Flickr | Beige Alert)

The Young Wealth Team