Penny Stock Investing Tips

Investing in penny stocks today can be an intimidating task for new traders & investors alike. If you have a general idea of some of the basics, it will help you stay ahead of the curve. Here, we’ll go over some of the top tips for penny stock trader to consider:

First Tip For Buying Penny Stocks Today: Look For Positive Market Sentiment

We don’t mean to pick penny stocks that have a ton of “twitter hype” but to choose ones that actually have positive sentiment. This includes articles by reputable sources, analysis from people with a proven track record and at times, look for companies that have verified reports on a specific penny stock that outlines both the positives and negatives of that stock.

Second Tip For Buying Or Investing In Penny Stocks Today: Look For Companies That Could Fit The Bill For A Buyout

Many of the most successful penny stock companies have actually returned the most to their investors after being bought out. Some companies also complete a strategic deal with a larger company and affect a big market move. 

Take the case for the marijuana stock industry or the industry of biotech stocks.  It isn’t uncommon to see smaller companies – trading as penny stocks – build a strong framework. They don’t do it to necessarily make millions of dollars in the near term. They do this to set the stage for a take over

Think of their “going public” as a penny stock as phase one to raising better capital.  They were most likely a private company, decided they needed to raise money, saw limits of staying private, then went public. 

Similarly, being a penny stock company has its limits to quality capital. Some companies will build up their operating assets, put good deals in place, all to present to a larger firm for a takeover.  In these cases, investors can score big.

Third Tip For Investing In Penny Stocks Today: Keep Your Capital In Mind

Penny stocks are not on the same investment scale as a large cap or Blue Chip stocks.  These are higher risk and investors face the potential of losing their whole investment if one of these start up companies fails to deliver on their business model.  In this case, it is prudent to observe your capital position in the market. 

As a rule of thumb, most investors will allocate a smaller portion of their overall liquid cash to penny stocks. Small investments can turn into huge windfalls AND investors won’t see 100% of their capital placed into one of the highest risk classes in the market.

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