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Tuesday, November 28, 2006

Chapter 7: Finding Legit Penny Stocks

Throughout this e-book, you have noticed that we give both the good and the bad when it comes to penny stocks. Here’s why. There is no sense in telling you that you can make a huge amount of money with penny stocks if you do not know about all of the traps out there. In fact, one of the key points to this e-book is the fact that you can make a killing if you learn how to avoid those traps.

As we mentioned, there are good and bad aspects to each area of penny stock investing. But, we want to talk about some of the good stuff here for a minute.

For example, while there are bad companies out there and scams galore when it comes to penny stocks, there are plenty of opportunities as well. Your goal will be to find legitimate companies that do trade with pink sheets rather than on the big stock markets.

What is the best company to invest in? It is hard to say that one company or the next is the best one to go with, but the bottom line is that you can always find the fresh guy in the bunch. A fresh, young and even hip company can be the ideal company to invest in.

If you purchase those penny stocks for this brand new company at just pennies and hold them throughout the bad years until the company gets established enough, you may be able to sell them for top dollar really making a good deal of money off of these penny stocks. Yet there is a formula that needs to come from doing this. Here is your formula for success with new companies.

1. Do your homework and invest in companies that you have learned are real and offer something you believe is vital. You do not want to invest blindly into a new company. Do your homework as we have talked about here.

2. Purchase using a good amount of capital that you are okay with a high risk with. Remember; plan to lose it all so that when it comes back to you, you are safe. If you lose it, it shouldn’t kill you financially speaking. Invest into the company as much capital as you can to gain as many low cost shares as possible while they are low cost shares.

3. Hold it. The key to making sure that the new company gets off the ground and does well is to hold your penny stocks. If you are investing for the long term, the penny stocks can only pay off in the long term if you hold them through the rough first years of business. Then, prices will rise as the company grows, expands and meets goals. Selling quickly will not allow you to break even.

Of course, a bit of luck always is helpful it comes to any investing strategy!