Penny Stocks Investing – Small beginnings

May 23, 2010 by
Filed under Stock Market Trading

Investing in penny stocks is about defining the rules and playing by them as all of the large time investors have before you. Big time stock traders and investors have played by the rules and set about small, or even very little, swearing by a defined set of rules that basically state they will not continue any cycle of failing that loses them money, over and over. Losing money instead of learning these rules is one thing that is unacceptable and potentially crippling to a new investor – even though your brain is attempting to inform you that “Heck, it’s not important, they’re only Penny Stocks in any case” (Damn you brain!!)

However, follow a few simple rules and you should be ahead of the penny stock investing game. Number One and MOST important – Never, ever, under any circumstance take a loan to invest; this is possibly the biggest rule to stay out of investment trouble. Yes, I know! You think you have the upper hand with some “inside” information that may help you build a vast portfolio without delay! So have thousands of others before you – and they were all WRONG! Please, don’t jump on an account with the only answer being borrowing money. If you begin to lose money on the stock market, then the debt repayment will come directly out of your pocket. If this happens, trust me – you are now in big trouble. So have thousands of others before you – and they were all WRONG! Please, don’t jump on a story with the only answer being borrowing money. If you start to lose money on the stock exchange, then the debt repayment will come directly out of your pocket. If this occurs, trust me – you are now in big trouble.

Even if you start to make money then you will be spending it to repay the loan as opposed to saving or reinvesting the funds. This money will stand by and haunt you as you continue to try to create a living off of the stocks you are trading. Always economize to be able to invest as a rule, debt will be chased until you ultimately catch up by being farther behind than you were for starters. DON’T DO IT!

Investing in profitable firms is a big rule to keep in mind when investing in penny stocks. I know that reads and sounds awfully silly and a waste of breath but believe me – often times people simply put money into a company without determining if the firm is profitable or not. Either they like the name itself – or the product / service the business offers – or even they know a cousin of the manager of the typing pool and reckon it’s keeping it in the family!

Don’t be the sucker that buys a stock and then tunes in to the telly or logs on to the internet to see that its quarterly earnings are down and its revenue per share is dropping like a four-ton boulder of the Empire State building – very hard and very fast!).

Find information on how to discover a profitable company, it is easily available on the web, and then determine which company to put money into. Guides for how to evaluate firms, their accounts declarations and markets are readily available. Also, do all of your homework, research and analysis before you purchase a stock that isn’t garnering any sort of attention.

One of the most important matters for investors to check out is volume, anything less than a million each day is not worth touching. It is a pointless task to purchase a stock that is trading 9,000 shares a day as it will be nearly impossible to sell as soon as you are ready to do so. Stocks need to have liquidity, which basically suggests that for it to sell it need to have value. Don’t be tied to a rising stock that you will be incapable to sell later. Don’t just think of all the lovely profit you’ll generate – think about the mechanics of actually being able to realise that profit. In the end – so what if you’ve made $1.20 per share in three months – if you can’t actually sell them!