Penny Stocks: Research Before You Buy

One of the best pieces of advice I have ever received is to research before you decide to buy

. This can apply to just about anything from automobiles to glue. You want to be sure you are getting the best value for your dollar.

This applies to buying penny stock as well. It is extremely important to remember that most big companies, including household names such as Nike, Coca-Cola and Wal-Mart all started as affordable stock.

There are many success stories as well as many stories of failure when it comes to buying penny stock. The difference is often the amount of research put in, as well as the amount of risk you are willing to take on a particular company.

The next question then, seems to be, where can I research these inexpensive stock options and how can I know for sure which ones are good?

A great place to start researching is within the stock market itself. As you search the stock market, and specifically the affordable stocks, watch their activity within the past few months and see if it looks as though the company will be profitable in the long run.

Also, another place to research penny stocks is through the various penny stock newsletters that can be found on the internet. However, many top investors say that researching the company, including the history, founders, and goods and/or services offered is the best way to discover if the company and subsequently, its stocks will be profitable for you.

Now, if you are unsure how much money you may need to start investing in these inexpensive stocks, the answer is however much money you feel like you can afford to spend.

There is no solid and defined answer for how much you should invest when buying penny stocks. Although, if the stock you have purchased skyrockets, it may be worth the few extra pennies or even dollars you would need to spend to get a higher return.

Before you go out and spend a lot of money on a company that will not give you a high return for your investment, make sure that you also research competition, and the history of competitors in that given market segment.

It is important to understand that though you may be able to make a huge profit from these affordable stocks, it is possible to lose a large amount of money as well. Remember: research is the key!

by: Terry Daniels

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