Penny Stocks Explained | QoreFinance

Pennies Spilled Out of a Jar

If you’re like millions of other people right now, you’re probably worried about your financial future. But, unfortunately, no one knows what the future holds. That’s why it’s more important than ever to invest and keep the cash flowing.

Investing in penny stocks is one way to do that.

What are Penny Stocks?

Penny stocks go by many names: small caps, microcaps, stocks under $5. Basically, these are stocks of small companies that trade at less than $5 per share.

Some penny stocks are traded on major exchanges, like the New York Stock Exchange, but most trade over the counter, or OTC, through the OTC Markets Group or OTC Bulletin Board.

Penny stocks infrequently trade, so it’s not always easy to find buyers if you’re looking to sell. In addition, their lack of liquidity makes penny stocks highly speculative. In other words, they’re risky.

But you know what they say – high risk, high reward. If you have a high-risk appetite and play your cards right, investing in penny stocks can pay off.

A few things you should know about penny stocks:

  • Many of these companies are newly formed. Others are heading for bankruptcy. It’s not always easy to find historical information to better analyze these stocks.
  • Penny stocks don’t have to meet the minimum standards stocks on major exchanges have to meet.
  • It’s not always easy to find information about the company’s performance. Information that you do find may not be credible.

How to Find the Best Penny Stocks

Penny stocks get a bad rap. But some of them are good stocks that have become devalued and still have the potential to rebound. But, of course, others are stocks that have virtually no chance of recovery and are – more or less – a waste of money.

That’s why it’s so important to do your research beforehand.

  • Find out how the company makes money and look at its growth potential. Check their financial reports for this info.
  • Gather copies of the company’s recent SEC filings.
  • Does the company turn a profit, or can it turn a profit using its current business model?

Look for stocks in sectors or industries in an uptrend to reduce the risk of not finding a buyer when you go to sell.

If you’re willing to do your homework, you can find worthy penny stocks. But you have to take the time to do a fundamental analysis.

Choose Regulated Penny Stock Brokers

If you’re going to try penny stock trading, it’s important to make sure that you choose a regulated broker. Popular, reputable brokers include:

Are Penny Stocks Worth it in 2020?

They can be.  If you take the time to do a fundamental analysis, you can find penny stocks that are worth investing in. And it’s easier than ever to find reputable brokers and information on companies you want to invest in.

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