Penny stocks aren’t your typical buy and hold investment. It’s important to know the best broker to use that will allow you to trade these micro-cap stocks. Besides taking on too much risk in a bad company, another surefire way to lose money with penny stocks is to pay high fees to a broker. The best brokers for trading penny stocks usually do not add more fees for trading a high volume of stocks.
Take Charles Schwab, for instance. The broker allows investors to trade penny stocks on a platform that allows users to expand a portfolio outside of just penny stocks as well. There are also a number of online resources to offer their clients as an added bonus.
E*Trade als offers a pricing structure that can actually be less expensive than Charles Schwab after roughly 300 trades per quarter. If those figures aren’t attainable, there may be other options still.
Penny Stock Broker Fees
First, let’s take into account the scenario of a beginner penny stock trader. Let’s say you have $500 to invest. If you find a stock trading around a penny, that would be 50,000 shares of a stock. But you haven’t factored in the fees of making the trade. Many brokers will charge a $10 fee to place the buy order and then another $10 to place the sell order. Therefore you actually have about $480 to invest.
Some brokers may even charge hidden fees for trading low priced penny stocks as some of these stocks trade below $0.01. Figuring this into the equation could be worth another $30 as a flat fee. Now you’re left with $450 to buy this sample penny stock. Though $50 may not seem like a lot, based on your $500 in cash, you’re giving up 10% in fees alone!
What Makes A Penny Stock Broker A Good One?
There’s always risk when it comes to trading penny stocks, and much of the factors that can end up resulting in big moves in the market are not within the actual control of any one retail investor.
The thing you can control to some degree, your broker fees. For this reason here are some of the most popular stock brokers for trading penny stocks:
- Charles Schwab
- TD Ameritrade
- Interactive Brokers
- Merrill Edge
Find the one that works the best for you and keep in mind the up front and other hidden fees you’re going to pay in order to buy penny stocks.