Penny stocks are stocks that cost $5 or less per share. Any investor can buy any stock, not just penny stocks, without a live broker. Online brokerage firms and the popularity of self-directed investing has made this possible. There is a host of online brokerage firms that give the individual investor many choices. Examples include E*Trade, ShareBuilder, Fidelity and TD Ameritrade. These companies charge between $4 and $20 per trade. In addition, ShareBuilder is a dollar-based brokerage, not a share-based brokerage. Therefore, for a fixed fee you can automatically invest a fixed amount of money every month to buy a particular stock or group of stocks over time. There is no minimum required amount to open an investment account.
Instructions
1. Research the penny stocks and the companies behind them. It is important to know the strengths and weaknesses of the companies you want to invest in, as well as any recent news or earning reports that may affect the stock price. See a link in Resources for reliable penny stock research sites.
2. Decide on how much you want to invest. Your investment objectives--whether they are long-term buy-and-hold or short-term trading for quick profit--will determine how much of your investment dollars will go into what penny stocks. It is also important to make sure that you diversify your investment portfolio.
3. Open an online brokerage account. Many financial institutions offer these accounts, including those mentioned above. Choose an account with a firm that best matches your investment objectives and style.
4. Link your checking account to your brokerage account. This allows you to fund your stock purchase.
5. Buy your penny stocks. If you set up an automatic investment account--such as the one provided by Sharebuilder some of your dollars will be allocated to purchase the penny stocks of your choosing each month.
Tips Warnings
Bear in mind that investing in penny stocks can be very risky. The Securities and Exchange Commission warns that you may lose your entire investment. Also since penny stocks belong to companies that are relatively new and unknown, it is more difficult to research these companies.
Tags: penny, stocks, without, broker, penny stocks, brokerage account, brokerage firms, dollars will, online brokerage, want invest, your investment
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