How Do I Pick The Best Penny Stocks?

By • Apr 14th, 2010 • Category: Make Money

Penny stocks are very attractive for first-time or seasoned stock investors and traders alike. This is not surprising considering the financial benefits of the right approach to trading and investing in penny stocks. The emphasis here is on the right way as these micro-cap stocks are among the riskiest investments in the market.

There are some standard approaches to get rid of the bad stock picks from your list. Learn & apply the following tips and you will join the group of successful penny stock traders.

Company Research

The need to do your due diligence on the company issuing the penny shares cannot be overemphasized. This is because many companies issue shares of stock with the aim of acquiring more money before the owners abandon ship, which means that you have just been duped into parting with your money.

When a company website claims that it has ‘secret’ company facts become more aware of the possibility of a scam.  Inside information claims are designed to lure in the investor into buying shares of stock that are either worthless or non-existent.In either scenario, you end up losing your investment.

Getting your hands on the auditied financial statements is a huge plus.Now you can look at the company fundamentals in light of its net worth, cash flow and net income.  Of course, all of these fundamental measurements must be in good stead simply because you want to buy into a company that has a bright future.  It is good business sense.

Also, do your research on the people behind the company as quality of management is very important.Do the research, go through trade journals, ask other investors and use online resources for this.

Use the Internet

And speaking of using the Internet, there are message boards, dedicated websites and online forums that you can join in to get the best penny stocks picks.  Just be sure to supplement whatever information gathered from these sites with your own research.

This is because many of your fellow joiners and browsers have hidden agenda, of which luring you into a soon-to-fold-up company is the most common. Of course, you will not be told of this little fact.

There are also sites that allow for monitoring of penny stocks in real time. Yahoo! This feature will be beneficial, so use it to your advantage.  You can analyze the trends with either one or many penny stocks using these websites.

Of course, we recommend investing and trading in penny stocks with sites like the NASDAQ SmallCap Market and the AMEX precisely because these are the most reliable venues within which to find the best nano stocks. Though the requirements are less stringent than for large cap companies, there are some listing requirements which help mitigate some risks for you, the investor.

Whether you day trade penny stocks or want to invest for a slightly longer period, it all starts with a good penny stock broker.

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