One company that does is FuelCell Energy Inc. Investors interested in penny stock trading should also focus on companies that have cutting-edge products. Penny stocks have been subject to scams in the past, and research and reporting requirements will help investors only invest in reputable companies. It is also a good idea to trade on either the NYSE or Nasdaq, where reporting requirements are stricter than the Over-the-Counter Bulletin Board (OTCBB) or the Pink Sheets. Information can also be found via writing, calling, or visiting the company's website. A number of analysts follow some penny stocks. What to Do When Picking Penny Stocks to Buy 2016īecause of the speculative nature of penny stocks, investors interested in penny stock trading should make sure they research the companies thoroughly before investing.
That way, while any gain in penny stock trading will happen only to 2% or less of your portfolio, so will any loss. No single penny stock should ever be more than 2% of your total investments. Money Morning analysts advise never allocating more than a small percentage of a portfolio to penny stocks. Some of them have great promise, but the developing products have yet to come to market - and therefore have yet to turn a profit.Īlso, although they can be profitable investments, their speculative nature makes them unsuitable to be a big part of any investor's portfolio. Penny stock companies are often small businesses with cutting-edge products in development. In part, the volatility is also due to the companies. A $1.00 fall or rise in a $4.00 stock is a 25% move, much more than a $1.00 fall or rise in a $40 stock, where the $1.00 accounts for only 2.5% of value. In part, the volatility is due to the prices of penny stocks. Penny stocks, though, are even more volatile. Markets, in general, are volatile, and investors always need to keep the risk of a downturn in mind. Why? First, investors interested in penny stock trading need to realize that penny stocks are highly speculative investments that can go up, but can also just as easily go down. A look at the market's charts every week will show a number of penny stocks that surged handsomely in the sessions.Īlthough penny stocks can return profits in the triple digits, it is more prudent to think of them as potentially strong profit generators rather than vehicles to make you rich. The shares are by definition inexpensive: They have to sell at $5.00 or less to be considered a penny stock. You see, penny stock trading can be very attractive. Our penny stocks to buy 2016 list was formed with some very specific factors taken into account.
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