3 Ways to Expand Your Knowledge of Penny Stocks

So maybe you just got a bonus at work or you finally won some extra cash playing those scratch-off tickets and now you’re wondering how you should put your windfall to good use. If you’re the type of person who is eager to turn a risk into a reward, making an investment in penny stocks could be right for you. Educating yourself is key when making any investment and with penny stocks the learning process is ongoing. Let’s discuss how you can expand your knowledge of penny stocks in order to make the investment that is right for you.

OTCBB and Pink Sheets

The first step in your penny stock investment journey is research. You’ll want to consult the Over-the-Counter Bulletin Board (OTCBB) and the Pink Sheets. These are listings that provide information for companies offering penny stocks. The OTC divides such companies into tiers, depending on how much information is available for each company. The less information that a company has on the Bulletin Board, the greater the risk there is in investing in that company. In addition to the OTCBB, it’s sometimes possible to obtain a company’s annual report or additional information from your state’s securities regulator.

Paper Trading

Expand Your Knowledge

Before you actually invest in penny stocks, it’s a good idea to practice first using a technique called paper trading. Write down the penny stocks that you would like to invest in and the amount of imaginary money that you have invested. Then keep track of your imaginary portfolio for a couple of months on paper. 

This will give you a good idea of how volatile a stock actually is and it’s also a good way to familiarize with the terminology used in penny stock investing. If you prefer a more high-tech method than pen and paper, there are several stock market simulators available online.

Penny Stock Brokers

Once you’re ready to invest in penny stocks, you’ll need to open a brokerage account and consult an adviser. A good broker can help you assess risk and provide you with the tools you need to analyze potential investments. They can also help maximize your investments. When choosing a broker, it’s important to make sure that they offer the investment products that you’re looking for and that their services fit into your budget. You should also choose a broker that follows all regulatory guidelines as set by the Financial Industry Regulatory Authority (FINRA).

By utilizing the methods and resources discussed here, you should be able to invest in penny stocks with confidence. Just remember that it’s a continual learning process. Once you’ve made your investments, it’s important that you keep in contact with your broker and continue to monitor the prices of the stocks you’ve invested in. It’s also essential to keep an eye on the OTCBB, not only for listings of companies that you’ve already invested in but also for companies that you may want to invest in later on. With a little diligence, you can make penny stocks work for you!

This is an article provided by our partners network. It might not necessarily reflect the views or opinions of our editorial team and management.
Contributed content