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How To Make A Killing In The Penny Stock Market

By Jason Markum

The one thing that I love about stock market investing is the broad range of options that you have. You can invest in large cap stocks, you can invest in mid-cap stocks, you can invest in small-cap stocks. You can invest in mutual funds, you can invest in bonds, you can invest in money market funds, you can invest in gold, silver, other precious metals, and you can even invest in currencies if you like…

And one very exciting and, I’ll admit it, fun area of investing is the Penny stock market or pink sheets as they are sometimes referred to. Penny stocks are stocks of companies that are very small and have just gone public at prices between one cent and five dollars per share.

They allow you to buy in to a new company that has a lot of potential, at least potentially a lot of potential as not all of these stocks grow. In fact most of them don’t! But when they do, they provide incredible opportunities for over board profits. Just think about it; if you bought one million shares at a penny each you will have spent $10,000… imagine if that share price rises to $20 a share! You’d have $20 million off of a $10,000 investment.

Now this is an extreme example and chances are you’re never going to see that sort of a movement, but you get the idea of why this can be so much fun. If $10,000 is too much of an investment, and it may very well be since these are higher risk companies, you can still have a lot of fun with just a few hundred dollars since these prices are so low to begin with.

To have the best chance of winning in the Penny stock market, be sure to look for high-quality new issues that are underwritten by brokerage firms. This may be harder than it sounds! There simply aren’t many penny stock underwriters out there.

There are several ways to track down a good investment in the Penny market. One way is to follow a variety of different newsletters that focus just on penny stocks. Let the newsletter do all the heavy lifting and find these for you as many of these newsletters will be able to track underwriters over time and will have a better idea of the best underwriters to follow.

Be sure to do your own research. A penny stock is just like any other stock in that it is bound by the fundamentals of the company that issues it. If a company has a strong balance sheet and a good business model and steady cash flows, the chances are that the stock will perform better than a company that doesn’t have these things.

Finally it’s hard sometimes to buy penny stocks because the best ones are offered to the underwriters best customers first. Eventually you may become one of the underwriters “best customers”, but until then simply keep trying to find quality issues as best you can.

I suggest you limit your purchases to $500-$1000 and no more because it’s easy to spend more as you get caught up in the action but this amount is fairly adequate to take advantage of some nice price movements if they happen.

Penny stocks are a lot of fun and you can make some significant money; but as with all investment opportunities be sure to understand the risks involved and do your homework!

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