This is a companion article to my Bukisa article “Beginner’s Guide to Buying Penny Stocks”
What is a Penny Stock?
In layman’s terms, a penny stock is simply a common stock that trades for less that $5 per share and typically is traded on the ‘over the counter’ stock market (OTC) — outside of the major stock exchanges such as the NYSE or NASDAQ.
And, true to their name, a great number of penny stocks actually trade for pennies and many for fractions of pennies.
Many new businesses get their start: as ‘penny stock companies’.
Penny Stock Companies:
In order to raise money and get their business off the ground, many new companies will offer common shares of stock in their businesses. Because they are unknown and unproven, they are usually viewed by investors as being very risky. So, their initial offering share prices can literally be valued at well under one penny per share.
In fact, I have frequently owned stock in several companies for which I paid just $0.0001 per share!
* That amounts to one million shares for $100! (1,000,000 shares X $0.0001 = $100).
How to Make Millions on a $100 Investment – Buying Penny Stocks:
1. Buy one million shares of penny stocks at $0.0001 per share. ($100)
2. The company really takes off and their stock price increases to $1 per share or more!
3. Your one million shares is now worth at least ONE MILLION DOLLARS!
Getting Started Buying Penny Stocks:
First, besides some money to invest, you’re going to need either a stock broker or an online trading account. I use Scottrade.com, but there are many others to choose from like E*Trade, Charles Schwab, etc.
These online traders will require a minimum deposit to get started and will charge you a small commission when you trade stocks (either buying or selling).
Second, after your trading account is set up and you’ve deposited some money, you next need to decide what stocks you want to buy. All you need to do to find ideas on stocks to buy is to Google the terms “penny stocks” or “hot penny stocks” and you’ll find dozens of sites providing penny stock tips. Here’s a link that I use frequently: http://www.thehotpennystocks.com/
Once you’ve picked a penny stock or two to buy, you’re all set.
The online trading company will ask you for the company name or its stock symbol that you want to buy. Then, you need to decide how many shares you want to buy, etc. Basically, they lead you right through it.
Those are the basics!
Personally, I didn’t read any books beforehand — I just waded in and learned as I went. I didn’t even have the weak advice that I’m providing you with!
If you would like to learn more, here’s a link to a FREE online book by penny stocks guru Peter Leeds titled “Understanding Penny Stocks”:http://www.pennystocks.org/
Buying Penny Stocks = Gambling
Why would you gamble your hard earned moey at buying penny stocks?
First of all, it’s fun to buy penny stocks and follow what they do. Second, there’s always the chance that you’ll pick one that could turn into the next Microsoft or Google!
But, I have to caution you on a couple of things:
1. This is just like Las Vegas or Atlantic City — unless you can afford to lose the money, don’t play the game.
2. This can be addicting!
On the other hand, you just might pick one and become a millionaire!