One of the biggest obstacles for people getting involved in investing is the expense, which is a shame. After all, investing can be a great way to set you up with greater financial stability. While we tend to imagine trading as something of a Wild West endeavor, when managed properly, it can be a firm financial foundation on which you can plan and build your future. That said, that future is far too often barred from those who cannot afford the steep prices associated with big-name options.
That’s one reason why trading penny stocks is such a popular activity. They offer people who would otherwise be excluded from the stock trading game a chance to make some gains, and offer newcomers to practice a chance to get their feet wet with low-risk high-reward options. With that in mind, let’s take a look at how to invest in penny stocks.
Start Small
As the name would imply, these choices aren’t designed to be huge investments. They typically cost only a few dollars per share. You’ll, thus, want to roll with that and start small. Don’t try to break Wall Street, and don’t expect these to allow you to do so. Just try and make small, incremental gains, and get a feel for what trading is like. Think of these as training. No one wants to make a mistake, but it’s better to experiment and learn with these than with bigger, costlier options.
Watch Out for Scams
While these stocks certainly are not high profile, which means they often aren’t listed in the Nasdaq or Dow or other major trading institutions. Instead, they are handled on smaller trading markets. While that makes them more accessible, it also means there is far less information about them available to the general public. This, in turn, raises the chances of you falling prey for scams such as pump and dump and shock and drop schemes.
Be sure to do your own research about any stock that you plan to engage with. If you read bad reviews or find any reason to view it as questionable, ditch it – there are plenty more stocks out there without you having to wonder if they’re a scam. If the proprietors are less than forthcoming with details, look elsewhere.
Diversify with Stable Investments
Instead of looking for high-risk investments, or depending on one or two streaky stocks to make you rich, make sure to diversify your investments with stable choices. For example, the S&P 500 offers low-cost stocks that can be easy for beginners and low-cost seekers to buy. The oversight of the S&P 500 makes them a far safer trading option than some of the other potential market scams.
What’s more is the S&P 500 offers many different low-cost options, allowing you to diversify your portfolio with higher-quality penny stocks without having to engage in riskier trading practices. These are the kinds of investments that can translate into long-term holdings and consistent trading wins, which is how you make real money trading stocks.
