If you are interested in buying penny stocks, there are several things you must consider and do prior to investing your money. Penny stocks are stocks which trade at five dollars or less on the market and are often handled as over-the-counter sales, also known as the Over the Counter Bulletin Board.
You can purchase penny stocks directly from the company issuing the stocks by contacting their investor relations department. Many companies offer this option on the main company website. You can find out from this department whether the stocks are available for direct purchase, any minimum requirements they may have for a purchase this way, and if there are any processing fees. Sometimes companies will put a high purchase fee on this type of transaction to discourage purchasing outside of a brokerage company.
It is very important that you do research into the company prior to making a purchase this way. “Hot Stock Tips” received via the fax machine or email are more often than not a fraud. These tips are sent out as paid advertisements and are not based on any company performance records. The risk can be very high, even in the penny stock market, if you do not do accurate research prior to investing.
You may also employ the services of a brokerage to help you buy and sell penny stocks. This is a little safer when it comes to avoiding fraud, but it can become quite pricey. Make sure that you review the costs of buying and selling prior to making any agreement. If you play the penny stock market you will be buying and selling often. If you have very large fees attached to these actions you may spend more money in fees then what you are making in the trade.
As with any type of investment, the key to success in penny stock trading is information. You must be well informed about the company that you are investing in each time you purchase. Be very cautious of hot stock tips, and research each and every company thoroughly before you make any purchases. You must be aware of any associated fees or conditions if purchasing directly from the company, and you must be aware of brokerage costs. If you are willing to take the time to do all these necessary steps, you will have a much better chance of trading penny stocks successfully.