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Thursday, November 16, 2006

Chapter 5: Making Wise Penny Stock Choices

Now that you have a good understanding of what penny stocks actually are as well as how they affect you, it is time to consider how you can make wise decisions when investing in them.

The good news is that you can learn to make money, big money, with penny stocks. The question is; do you have what it takes to do that successfully each time?

In most cases, you will not make a profit every time you invest in penny stocks. They are volatile and can be something of a huge risk in most situations. Why is this?

There are a number of different reasons.

1. The companies that you are purchasing penny stocks from are generally low key companies without big names attached to them for easy recognition.

2. The companies do not have a track record, good or bad, for you to take into consideration with.

3. They usually do not have a lot of inventory or equipment or in some cases a definite market.

4. It is hard to predict the future of any of these penny stock companies in an accurate manner.

5. You need to find a stock broker that is working with you not against you.

As you can see, there are many things to take into consideration when it comes to investing in penny stocks. Yet, even with all of that said, people still flock to them. Why is that?

It is simple. They are affordable ways to invest in stocks in a virtually unknown company. Will this company that is just starting out be the next Wal-Mart? Will this company that is just getting into the game be the next big company with all kinds of potential? That ‘what if’ statement is what leads many to the table along with the ability to invest heavily without forking over a ton of money.

So, now it is your turn. How well will you do in finding solutions for penny stock investing? To help you, the next sections will cover some of the important decision making factors you need to keep in mind