By definition a penny stock (AKA cent stock) is a common share of smaller public companies.
These shares are generally priced much lower than most regular ones, about $5 or less per share; therefore, they are not listed on a national exchange and are generally sold over the counter.
The US Securities and Exchange Commission provide a full account of specific criteria met by these types of shares. Moreover, they raise public awareness regarding the risks of engaging in this type of investment.
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Even when it is widely known that the penny stock market is the breeding ground for speculation and manipulation, the truth is that millions of small investors place their faith in cent stocks and ultimately, manage to make a profit with this type of dealings.
The crux then lies in finding a way to make our involvement in the stock market work more like investing and less like gambling.
Broker-Dealer Trust: Should I get in?
Albeit specific regulation that bans broker-dealers from carrying out transactions unless they meet the requirements established by Section 15 of the Securities Exchange Act of 1934 and its regulations, there are thousands of unaware investors that jump headlong into a deal.
With the rise in technology, communication has enabled manipulators to reach their victims easily. Many stock promoters out there offer the best penny stocks only to later on perpetrate what is known as “pump and dump” schemes. This fact should not, however, prevent investors-to-be from joining the wide ranks of happy shareholders.
• Avoid Promotional “Best Penny Stock” Sales: Mistrust all kinds of penny stock soliciting. This practice is part of a larger manipulative scam which will amount to no good, at least for small, first time investors. Look for more “neutral” advisors and inquire about these aspects: gather information about the company revenues, about their debt load, the CEO and finally, how the company’s shares have been faring on the market. It is also wise to get a scoop on what the competition looks like. If you do your due diligence and research before plunging into some apparent awesome penny stocks, you are more likely to end up making a profit.
• Take all the Necessary Precautions by Protecting Yourself: As we mentioned earlier, the US Securities and Exchange Commission have set up clear regulations on how transactions should be made at this level. Make sure you read these regulations thoroughly and don’t be afraid to ask: if you can’t establish a healthy communication with your potential broker, there is no way that you can trust this tipster, let alone, trust that they will carry out the dealings to your best interest.
Likewise, if you are planning on getting off the hook by avoiding a discount broker altogether, you should know that the money you seem to be saving on commissions will be lost somewhere along the way. A very powerful guide to keep in mind is available through websites, such as pennystocks.com or awesomepennystocks.com that specialize in the matter.
What if the Market Drops: Should I get out?
When it comes to small investors; somewhere between panic and complacency lies discipline.
If you already hold penny stocks, there may come a time when you may feel your initial investment is slipping out of your hands like thin smoke.
You shouldn’t panic, though; keeping a cool head may mean the difference between making it through white waters and drowning altogether. Even if you are a seasoned penny stock trader, the real test of discipline is in the slow grinding down of the stock averages.
You may find yourself constantly asking: How much worse will it get? Should I lock in my gains and get out now? The answer to these questions is quite an intricate matter really; it would all come down to two basic principles: knowledge and trust. If you have purchased what you thought were the best penny stocks at the time, chances are that you still have a loophole to trade and maximize your earnings –or cut down your losses.
Due to high volatility in the market, predictability is a tricky business. This is the reason why deep research and knowledge of the stock market business is a must.
Even when your shares have plummeted down to the bottom of the stock market, you should refrain from selling blindly. Keep in mind that you only pay taxes when you sell smallcap stocks, so unless the shares have gone up considerably, you should refrain from selling.
Study the figures closely and ask yourself if you are ready to lose the money already and look for some other business venture.
Penny Stocks to Watch: A Practical Guide for Beginners
It is easy for first-timers to get lost in the myriad of complex cent stocks alternatives. Whereas some fields of investment may prove to be a major no-no for beginners (like gold, silver or oil), there are other types of investment markets that stand a chance of being profitable for small investors.
The underlying principle is that larger sounder companies may be your best shot, along with index funds. If, on the other hand, you are of the adventurous type and wish to look for a struggling but promising field, here are your best choices of penny stocks to buy:
Even when small-company stocks, especially in the technology sector, are highly volatile, they still make great investment opportunities. The Nasdaq composite, which is heavy in tech and start-ups, meets standards of major market exchange and provides interesting stock shares for beginners and experts alike. Among the top performers in these past two years, biotech stocks gained a massive 120%, this trend however was significantly bucked as of the beginning of 2014. This pullback has its advantages; for one thing, this makes it a great time to take a chance on emerging companies that may be looking good in the near future. Take the case of Incyte, for instance. Last year, the company’s stocks gained almost 110%, this year; however, its shares have dropped over 6% so far. Seen in this light, the future may seem dim. However, later developments could reverse the fall. Incyte has made outstanding progress regarding development and commercialization rights with European pharmaceutical giant Novartis, thus majorly pleasing the company’s CEO and of course, shareholders.
With the increased globalization of cannabis-related products and the move towards legalization in many countries, it was only a matter of time before the pharmaceutical market made a jump start. This in turn, has transformed marijuana stocks into one of the best penny stocks opportunities.
In fact, last year turned out to be a breakthrough as far as marijuana stocks is concerned. A happy cent stock investor put it nicely when he claims to have purchased stocks at 45¢, only to find that they have now climbed to $2 each: amazing. The most outstanding case involves GW pharmaceuticals plc –a biopharmaceutical company which develops, produces and commercializes cannabis-based products.
Known as GWPH within the Nasdaq group, the company represents one of the most promising penny stocks to watch in years to come.
Getting the top penny stocks is all based on acquisition strategies any self-proclaimed investor would do well in developing. Being knowledgeable is probably one of the greatest assets when looking at what penny stocks to buy and when.
Most experts agree that while, yes, they have played some hunches here and there, expertise is an absolute must-have. Do your homework, get sound advice and invest wisely: think this one out with a cool head and save the gambling for your next visit to Vegas.