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Penny Stocks

Investing in penny stocks is risky, but if handled right, penny stocks can be very profitable.

Penny Stocks are issued from small public companies that usually trade common shares at $1.00 or less, although there are some so-called penny stocks that are traded from $3.00 to $5.00 a share. Penny stocks are considered high risk ventures that may have erratic earnings and revenues and are sometimes manipulated through faulty information.

Although buying penny stocks may be a high risk venture, a savvy investor can make a small fortune investing in them. As a rule of thumb, investors should use only a small amount of their capital purchasing penny stocks, usually money not needed for living expenses or retirement savings.

In some cases, because of the low liquidity of penny stock companies, investors may find it very difficult to resell shares once they have purchased them.

Should you invest in penny stocks? If you want to invest a small portion of your money, penny stocks may be the way to go because this type of stock can be acquired at minimal costs. If you are fortunate to invest in a company that experiences rapid growth, your returns may be enormous.

As with all investments, you should research the companies you wish to invest in. Take the time to find a broker who is willing to help you keep up with how your stocks are performing and the position your investment is currently in.

There are sources that can help you find how different penny stocks are performing such as Pink Sheet lists or the Over The Counter Bulletin Board (OTCBB). These sources are good for finding information on stocks and other over the counter investments.

It is a good idea to study the different stocks you might want to acquire before making your initial investment. This will give you an idea of how particulars stocks behave and the return you may get.

Keep in mind that penny stocks are less liquid than other types of stocks and the risks are greater, but if you do your homework and invest with caution, your investment in penny stocks could become very profitable.

If you are new to penny stock investing, start off small and never put all your eggs in one basket. Ask yourself if you want to invest in high risk, high profit stocks or do you want slower and steadier growth. With either option, caution is the key.

Remember that investing in penny stocks is serious business and it should be taken seriously. Develop a plan and work your plan. You should be open to diversifying your portfolio and you should always be willing to cut your losses if you have to.

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