Penny stocks are a worrisome thing in the trading world. A lot of people believe that investing in penny stocks is more like gambling than making real investments in the future of your financial health. After all, the majority of penny stocks are unregulated, which means that you can easily lose a lot of money on an investment that you’ve been counting on to help your portfolio grow. Yet, despite the risks associated with penny stocks, many people continue to invest in these options, using solutions like the Finviz screener to help them narrow down their choices and hopefully reduce their risk of a bad trading decision. Unfortunately, while stock screeners are great for helping you to narrow down your options when there are thousands of penny stocks to choose from, they can’t tell you whether or not a stock is a good investment. So, how do you find a truly good penny stock?
It’s All About Reducing Risk
For the most part, choosing a good penny stock is all about looking for a business that exposes you and your financial strategy to as little risk as possible. Remember, penny stocks are often sold on an over-the-counter basis, which means that they can appear on trading boards that aren’t as well regulated as the NASDAQ or Stock exchange. Additionally, penny stocks are typically tied to younger companies, which means that there’s not a lot of information available about them online to help you make your decisions. The speculative nature of penny stocks, along with the fact that they don’t trade frequently, means that you do have a number of risks to consider if you want to start building money with your penny stocks. However, it’s not completely impossible to find a good penny stock if you’re willing to put the time and effort into some serious research.Â
Learning About Your Penny Stocks
The best way to improve your chances of investing in the right penny stock is to learn as much as possible about every company that you’re thinking of getting involved with. For instance, it’s a good idea to target penny stocks that have a strong history of earnings, and strong trade volume. On the other hand, you should try not to rely on things like Penny Stock newsletters to help you make your trading decisions. Most of the time, these newsletters are unreliable and may own shares in the stocks that they’re talking about. While there’s nothing wrong with keeping an eye on the news, the market and the rumor mill, you’ll need to make your own assumptions about penny stocks based on what you can learn. Look for stocks with a heavier trading volume if you want to improve your chances of reliability. Additionally, make sure that you only trade in stocks that have a price over fifty cents per share, this will help you to avoid any stocks for companies that are on their way out. You should also avoid any stocks that are constantly being “talked up” by shareholders online.Â
