Stocks Under 5 Dollars

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Penny stocks. They are getting really famous these days. These are classified as stocks under $5 per share. These are most preferred by those investors who have lesser amount of capital, because they can own several shares without investing too much money. However, the drawback with investing in penny stocks is that they are much riskier compared to the regular stocks that are bought from major stock market. And unlike the regular stocks, penny stocks are usually available in over-the-counter and pink sheet markets, which are definitely riskier to invest with because most of the companies that are listed here are not required to submit their financial statement with the Securities and Exchange Commission.

How to Buy Penny Stocks?

So the next question that we might be asking ourselves now is how we can buy cheap penny stocks. Like the regular stocks in major stock market, we can also buy penny stocks through the assistance of stock brokers. Investors may choose between a discount brokerage or a full service brokerage. So what are the difference between these two brokers?

First, with a discount brokerage, the investors will save a lot on investment cost such as broker’s commission and transaction fees. However, the investors must know how to look for the best stocks to buy if they are planning to hire a discount broker, because discount brokers do not offer investment advice. Thus, they are not ideal for first time investors who have just started with investing in stocks under 5 dollars.

The other type of brokerage firm is the full service brokerage, which offers investing advice and helps the investors find the best and most reliable cheap stocks to buy. They are definitely ideal for first time investors who are not so confident with their skills when it comes to buying penny stocks and finding the hottest penny stocks in the market. However, this type of brokers are very expensive when it comes to commission and service fees, thus they have to expect that they will be spending more on investment cost.

Knowing Penny Stocks Better

In general, penny stocks are those stocks sold by small and new companies which are just starting with their business and are in need of capital. The risk with investing in such cheap stocks is that investors would not know whether such companies will grow and be successful with their businesses or not — thus, there is a greater risk of incurring a loss.

In order to avoid or prevent such loss, it is best for investors who plan to buy cheap stock to be very vigilant and to spend time in monitoring the stock prices of the companies that they invest with. If the prices will rise, even for just a little amount, then selling the stocks is most recommended so to lock up profit. On the other hand, if the stock prices will drop, investors may find it more prudent to give up quickly and sell the stocks nonetheless, in order to minimize exposure.

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