Penny Stock Investors

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What are Penny Stocks? Are they any good for a small time investor?

I’m thinking of investing only about a hundred dollars a month. Thanks!

Some very large companies have stocks that trade under $5. For example, Ford (F) was under $2 last year and take a look at that chart.

But I wouldn’t look to penny stocks only because you have $100 at a time to invest. BuyandHold.com and perhaps Sharebuilder will allow you to buy incremental shares of stock, so don’t worry about the amount.

I like to trade stocks between $1 and $15 with an average trading volume of 100,000 shares or more. I don’t like, nor would I advise trading stocks at a price with more than two decimal points, like .01144 or whatever. If you decide on penny stocks just make sure the average volume is decent (over 100,000 per day). Trading a stock with an average volume over 100,000-200,000 per day will help to insure that there are an adequate number of buyers and sellers of the stock keeping it liquid. It would be an unhappy scenario if you wanted to sell a declining stock and there were no buyers.

The key is to be educated, risk averse and have a really good strategy. It could be a breakout strategy, swing trading or rolling stocks. There are some very good opportunities to be found in penny stocks.

Best of luck!

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