Making a pretty penny out of penny stocks

Not all people have enough amount of money for equity investments. However, it should not prevent anyone trading at stock markets. You still can buy and sell stocks and turn an honest penny. Consider penny stocks.

What are penny stocks?

Penny stocks got their name because of relatively low price, which is typically less than $ 5.00. The low price makes penny stocks so attractive to individual investors who usually do not have sufficient funds to build a portfolio of the most expensive shares issued by large companies. Some penny stocks grow in price significantly, bringing their owners incredible profits, but there are cases when the companies issuing penny stocks turn out to be low-profit or even go bankrupt.
Some of the most successful companies started as penny stocks companies. The share price of such companies as Mylan Labs (MYL), Fortescue Metals Group (FMG), originally was well below five dollars, and now it is relatively high (though not a blue chip) and stable. There are companies that started small but it hit big and noted a remarkable increase in the stock price.

Penny stocks may grow in price and bring profits.
Penny stocks may grow in price and bring profits.

Rules to avoid risks at the penny stock markets

Penny stock companies are also known as small-cap companies. Small-cap stands for small-capitalization. These are companies with dollar capitalization less than $50 million dollars. This is the reason why their shares are traded for less than five dollars. But how can one choose these penny stock companies for investment? What are the risks? Since you are playing at the stock market there is always a certain level of risk involved. However, you can minimize the risk, following these simple rules:

1. Make inquiries. When choosing a company for investment, it is important to know if it can offer good prospects for the future. Check its economic background paying attention at each economic event; examine its vision and plans for the future development. This way you can reduce the risk of being a victim of a fraud.

2. Start small. It is better to start with small investment. Remember that you still get some experience from this type of shares. In this case cautiousness is not cowardice, but necessary preventive measure.

3. Follow the trends. Try to follow current market news to understand the common trends. Currently, the shares of IT and environmentally responsible enterprises are nice choice to invest to the future. You can focus on these sectors and keep yourself up to date with the news of these industries.
When you help these small companies, it is cannot be regarded as speculation. There is certain social responsibility that appears if you think that these small companies are really good in their sphere and have promising future. You may find that their products may be solutions to some persistent world issues. Though the profit may be small, do not forget that investing does not always means profit, but always means a game. Benefit is benefit no matter how we look at it. Do not lose courage, you may lose a few dollars, but, at the end of the day, you played the game. Who knows, you may make a fortune supporting losers.