When you think of ways to grow your wealth, what’s the first thing that comes to mind? If your first thought was “investing,” you’d be right. The stock market is a great way to earn returns on your money every year.
However, more than 55 percent of Americans don’t invest. This could be because they’re not comfortable with the market or because they think they don’t have enough money to get started.
Believe it or not, you don’t need to have tons of money to get started. Penny stock investing lets you enter the market without throwing down thousands of dollars.
Here’s what you need to know to get started.
Understand What You’re Getting Into
Before you can start investing in penny stocks, you need to do some research into how the process works, what you can expect, and the types of stocks you want to invest in.
Typically, penny stocks trade for much smaller amounts than standard stocks. This allows newer investors without tons of capital to buy shares more easily. However, their small share prices mean that businesses are struggling.
Unlike traditional stocks, penny stocks are fast-paced. Instead of waiting for companies to grow and earn dividends each year as you would with traditional investments, you want to sell penny stock once prices go up. This is how you make your returns.
You’re working on speculation rather than investing in a company you see growing in the long-term.
Avoid Investing Entirely in Penny Stocks
The best way to be successful when starting to invest in penny stock is to diversify your portfolio. This means buying traditional stock if possible, investing in index funds, and choosing other methods of increasing your income without dramatically increasing your risk.
Penny stocks are volatile. This is what allows you to make quick returns, but it also means they’re risky.
If you put all of your money into penny stocks, you risk losing everything you’ve worked to build. All it takes is one unpredictable market swing.
Diversify Your Penny Stock Investments
Just as you don’t want to invest entirely in penny stocks, you also don’t want to invest in just one company’s penny stock. You need to do your research and choose multiple companies you feel confident in.
If you’re not sure where to look, get advice from experienced traders and brokers that have worked in the industry. Resources like Jason Bond Picks can help you better understand which stocks are more likely to perform well and which you should avoid entirely.
Choose the Right Broker
You’re going to need to partner with a broker if you want to get started with penny stock investing. Think of the broker as your trading platform. It’s how you’ll find penny stocks, view trends, make trades, and monitor your investments.
Each broker charges for the service differently. Some charge a flat rate while others charge a commission on each trade you make.
Review your options and find the best deal for your needs.
Penny Stock Investing Can Be Lucrative
Penny stock investing isn’t for the faint of heart. It requires skill, patience, and a willingness to take risks.
It is possible to build your investments and create wealth with penny stocks. However, it likely won’t happen overnight. Start small, be cautious, and you’ll likely be successful.
For more insight into how to get into penny stocks, check out our latest posts.