Buying Penny Stocks

Buying Penny Stocks is risky business, however, can be very profitable. Huge stock market fortunes do every day! Many actions that used to be popular all over Penny Stocks like Microsoft, Nike and Wal-Mart. A penny stock is a stock that is priced under five dollars or dollar reserves. Penny stocks are traded on the over-the-counter (OTC). There are six steps to follow before buying penny stocks.

The first step is to obtain information by asking the broker with written information and recommendations penny companies.

The second step is to find a good broker to do some research on the history of its own and invest on their screens. Also check if he had any complaints against them.

The third step is to keep good records. Ask your broker to send a written copy of all the forecasts and the stock price about the prospects for the company. Keep notes on each broker. Get other opinions on shares of the company and the people who should know also the banker, the stockbroker and other financial advisors.

The fourth step is to use common sense. Ask yourself why the broker is offering these for you. Remember, if something is too good to be true, it probably is.

The fifth step is to not rush to make a purchase decision. If there is not enough time for you to check carefully any investment in shares, not to invest.

The final step is to satisfy the concerns or questions about potential fraud, which can be present at the race that is made for you to contact the state or federal securities regulators.

It is important to note that investing in penny stocks can give good short-term profits, but also can cause large losses in a very short time. This is partly due to the risks generally involved in the trade market forces operate, and the high number of fraudulent practices by selling these stocks. The issuers of penny stocks have no regulatory requirement for financial statements available to the SEC, appropriate and relevant information will be very difficult to find what makes it very difficult to properly evaluate an action.

In normal situations, investments in stocks with potentially high returns over a period of time tends to be risky, but with penny stocks, this risk is greatly increased with the high level of fraud occurred in trade in these stocks . Lately, many investors have become more sophisticated and aware, so there are fewer problems associated with these stocks.

These days it is still possible to buy penny stocks and make lots of money in the market. However, it is necessary that you choose a broker wisely and use your common sense. Remember, with great rewards are also greater risks. You should never invest more than you can afford to lose.