How To Buy Penny Stocks
Penny stocks can be bought the same way as you would buy any other stock, which is through a brokerage account.
All you really need to get started buying penny stocks is some money to invest and an online broker. Penny Stocks can be traded through just about any brokerage account, where orders can be placed either online or by phone.
You can find a variety of brokers, just about all offer you the opportunity to buy penny stocks. However, some stock brokers charge extra small fees for penny stocks, so make sure you check on what their penny stock fees before opening an account.
So, What is a Broker?
A brokerage firm is basically a dealer of stocks that acts as your agent when you want to buy or sell stocks. If you’d like to buy or sell a share of stock in any publicly traded company you’ll most likely need the services of a brokerage firm or a broker.
For example, when you want to buy groceries, you go to the grocery store. When you want to buy a computer, you go the electronic store. And when you want to buy stocks, you need to do business with a brokerage firm. Read about Choosing a Broker.
How To Get Started
Opening up a brokerage account is as easy as opening a bank account. Just about all online brokers let you fill out all the paperwork online so that you can open an account online and funding your account is easy, just basically have to transfer funds over from your bank and then your set to go.
Before you open a brokerage account check out their commission rates. Also, note some online brokers might charge a small extra fee for buying stocks that trade Over-the-Counter or trading under \$1, so look into that as well.
Commission rates vary from broker to broker. But, just because a broker has very cheap commission rates doesn’t necessarily make them the best option to go with. Some brokers may have very cheap rates, but has very poor execution on trades. The best brokers offers a a good mix of low commission rates and who also offers good trade execution.
Also, some online brokers might have minimum opening balance requirement. Some might have none, some are as low as \$500 or \$1,000, and a few are higher. Just have to check before you begin opening your account.
There is a huge selection of brokers to choose from out there, some of the most popular ones include: Etrade, Scottrade, TD Ameritrade, Charles Schwab, Fidelity, Zecco, TradeKing and many others.
Just about all online brokers let you fill out all the paperwork online so that you can open an account online and funding your account is easy, just basically have to transfer funds over from your bank and then your set to go.
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What Else You Should Know About Buying Penny Stocks
Knowing how to buy penny stocks is one thing but knowing the best penny stocks to buy and when to sell them is another. Remember, penny stocks are volatile and speculative and buying penny stocks can be risky.
Sure, penny stocks can multiply many times over, compared to a slow-moving blue chip stock. Penny stocks offer you the chance to double, triple, quadruple your money.
But, people tend to see only the upside of penny stocks, while forgetting about the downside. A 50 cent stock can just as easily go down by 25 cents and lose half its value or more and may never get back to that level again.
So, before you jump right into investing or trading in Penny stocks, you should always do your research on the stock of the company you are about to buy. Just don’t just go off and start buying random penny stocks hoping they’ll go up in value.
The point is, whenever investing in Penny stocks, make sure you do research and understand what you are getting into. And if you are trading penny stocks you should always put in a tight stop loss.
If you are looking for a little help on getting started I offer a free Penny Stock Newsletter that is great for beginner investors & traders.
My Penny Stock Newsletter offers you top stock alerts, trading & investing tips, and exclusive research that you won’t find for free anywhere else. I also send out tips on how to be a smarter investor, how to find your own picks and how to trade penny stocks yourself.