Where Do You Buy Penny Stocks

Where Do You Buy Penny Stocks – This article was written in collaboration with Andrew Lokenauth. Andrew Lokenauth is a CFO with over 15 years of experience from Wall St. and in Tech & Start-ups. Andrew helps executives translate their financials into actionable business decisions. He has held positions at Goldman Sachs, Citi and JPMorgan Asset Management. He is the founder of Fluent in Finance, a company that provides resources to help others learn how to build wealth, understand the importance of investing, create a healthy budget, design debt repayment strategies, develop a retirement road map and create a personal investment plan. . . His insights have been cited in Forbes, TIME, Business Insider, Nasdaq, Yahoo Finance, BankRate and the U.S. Finance. News. Andrew holds a Bachelor of Business Administration (BBA), Accounting and Finance from Pace University.

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Where Do You Buy Penny Stocks

, is a publicly traded stock with a very low price per share, usually less than five dollars, sometimes less than a dollar (hence the name “penny” stock). They are usually issued by smaller, less established companies.

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This article was written in collaboration with Andrew Lokenauth. Andrew Lokenauth is a CFO with over 15 years of experience from Wall St. and in Tech & Start-ups. Andrew helps executives translate their financials into actionable business decisions. He has held positions at Goldman Sachs, Citi and JPMorgan Asset Management. He is the founder of Fluent in Finance, a company that provides resources to help others learn how to build wealth, understand the importance of investing, create a healthy budget, design debt repayment strategies, develop a retirement road map and create a personal investment plan. . . His insights have been cited in Forbes, TIME, Business Insider, Nasdaq, Yahoo Finance, BankRate and the U.S. Finance. News. Andrew holds a Bachelor of Business Administration (BBA), Accounting and Finance from Pace University. This article has been viewed 922,619 times.

To buy penny stocks without a broker, start by opening an account with an online brokerage service like E-Trade or TD Ameritrade so you can monitor the stock yourself. Then use your online account to make purchases and transactions. Before buying a stock, research the company on websites such as Google Finance or the National Stock Exchange. Also, avoid buying stocks based on recommendations from sources such as telemarketers or e-mails, which are often scams. For more tips, such as how to incorporate penny stocks into your current portfolio, keep reading. Penny stocks, as the name suggests, are stocks in those companies that trade at a low share price, often for less than $1. Given such a low share price, there’s an understandable appeal to retail investors who dream of buying 10-cent stocks and watching them rise tenfold or more.

But before dabbling in penny stocks, an investor should be aware of several key factors that affect how these stocks trade and have a solid understanding of the inherent risks that follow.

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One of the biggest mistakes retail investors make is viewing penny stocks as cheap. There is a feeling that you are getting a better investment when you buy thousands of shares rather than a few shares in a company with a higher share price.

At first glance, this thinking seems rational because a $1,000 investment in Company A, which trades at $0.10, allows the investor to buy 10,000 shares instead of 10 shares of Company B, which trades at $100. . A key piece of information that is often overlooked is the number of outstanding shares.

Assume that company A and company B share identical fundamentals with the exception of the number of shares outstanding. For simplicity, let’s assume that both companies have a market capitalization of $100 million.

When the price of the stock is the only factor considered, a retail investor may believe that the quality of the company trading at $100 is much higher than that trading at $0.10. As we have seen in the example, this may not always be the case since they are identical, so it is important to consider the number of shares available.

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Another factor to consider when trading penny stocks is dilution. The number of shares outstanding can often get out of control through the use of tools such as employee stock options, issuing shares to raise capital and stock splits. If a company issues stock to raise capital, which many small companies must do, it can often dilute the stake of other investors.

For example, if Company A issued an additional 110,000,000 shares in an attempt to raise capital, it is natural for the share price to drop to $0.09 ($0.09 keeps the market cap stable at $100 million). In this case, the underlying business has not changed. But the number of shares has, which causes the share price to fall.

When trading penny stocks, it is important to find a company that has strong control over the share structure because constant dilution erodes the value of the shares held by existing owners.

Most companies that trade with share prices below one dollar have relatively small market capitalizations, but as shown above, this need not always be the case. When it comes to investing, it is important to consider the strength of the company’s fundamentals.

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Is the management team dependent on issuing new shares to raise capital? Is the company profitable or will it be able to make money based on its current business structure? Can the company compete in its sector? For those willing to do their homework, there are definitely gems to be found that meet these criteria.

As you can see in the chart for GGP, Inc. (GGP), the company’s stock price fell to the penny stock range during the 2008 financial crisis, and it redeveloped properties such as regional malls, until it was acquired by Brookfield Property Partners in 2018. Investors that kept an eye on the stock structure, underlying fundamentals and competition could have identified GGP as a prime candidate and benefited from a huge rally. in the years that followed.

Another key factor to consider is that certain sectors are more common to find stocks trading below a dollar. For example, the metals and mining sector is known for the number of companies that trade in pennies.

Given the reliance on issuing new shares to raise capital to fund operations, increased competition, and aggressive incentive plans, it is especially important for investors to consider the above factors in order to succeed. For those willing to do their homework, they will be able to identify the winners.

Best Brokers For Penny Stocks

When most retail traders look at a penny stock, they are often unaware of the underlying fundamentals, such as the number of shares outstanding. As is the case with all investments, it is important to examine a company’s underlying fundamentals and overlay this information with details such as how badly the shares are diluted through the use of stock splits, stock options and the issuance of new shares. capital.

Share dilution hurts existing shareholders and is especially common with penny stocks. Keeping an eye on the stock structure and other fundamentals mentioned above will help investors find winners.

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While markets ended Wednesday, May 25 with some gains, there is still a lot to be desired regarding penny stocks and blue chip stocks. Right now we see a lot of volatility across the board. And this volatility is characterized by significant daily changes

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