Important Things to Know Before You Buy Penny Stocks

Important Things to Know Before You Buy Penny Stocks

People, who desire to invest their money in the share market but do not dare to take steps due to their limited capital, have a golden opportunity to buy penny stocks and make their money double or more. Risk is involved in buying these types of stocks, but there is a risk is in every business at the moment as we have been through a worldwide recession in every field of business in the recent past.

There are many different definitions about penny stocks. According to the Security and Exchange Commission (SEC) stocks that are sold for less than five dollars, are called a penny stock. However, there are also some that say it is a stock that is sold against the penny. Whatever definition it may be, a trade that is performed on the Pink Sheets or Over the Counter Bulletin Board (OTCBB) where stock companies are enlisted, is called the penny stock market.

One should invest his money in top stocks to marginalize the risk. It is very tough for him to find out the top penny stocks as these stock companies are not enlisted in any regular share market and no information is available regarding these companies’ business. This is what the government has made compulsory for all small scale companies that they are bound to submit all their business information like operating expenses, revenue report, board of directors meeting and stockholder votes to the Security and Exchange Commission (SEC). Therefore the investors should go through OTCBB website to access the true information about the stocks they are interested in and gain more details on which penny stocks to watch.

Investors should also be aware about the rules and regulations to comply with in buying penny stocks. As they can be purchased at a very low price, people can buy thousands of good penny stocks and if the price rises are in the same day, they can sell them to make instant money so they can purchase more stocks with the profit of a previous sale. Therefore investors can trade as many times as they want. However, the government has imposed restrictions making sure that one investor can only conduct five trades in a week while his trading account is less than twenty five thousand dollars. If he violates this restriction, his account will be kept on hold for ninety days or until the value of his trading account reaches above twenty five thousand dollars.

Obtaining high profits is what attracts most people into this field of investment. But before pouring all of your hard earned money into buying the stocks of any company, make all the necessary inquiries and look into the prospects of all the companies that you are interested in that are available for investment. It would be better to invest in a company which has great returns and is going to have a stable position over a period of time.

So, if an investor follows these simple guidelines when stock trading and invest their money in top penny stocks, it is not a risky venture but assurance of a much higher return.

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