Penny Stocks are appealing to many new buyers because of their low cost. In the United States, penny stocks are those which sell for less than $5 per share. In other parts of the world, they are sometimes called cent stocks. Sometimes they sell for fractions of a cent per share. This definitely makes them among the cheapest stocks to buy.
Why Are Penny Stocks Offered?
New companies without capital to grow their businesses seek to lure investors with enticing share prices. Many of the companies are not sound business models and an investor should do their homework before investing in any company. Reputable companies with a sound business model and good product or service use the money from investors to get their business up and running.
Why Is This a Good Investment?
When dealing with stocks traded on NYSE and NASDAQ, a 100% gain (or a double) is scoring a touchdown. It doesn't happen frequently and with premium stocks, the shares are often expensive or even unavailable to the average person. Penny stocks may be the cheapest stocks to buy but they offer the opportunity for a 1000% gain (or ten bagger gains).This is like winning the Super Bowl. The reason the payoff can be so phenomenal is that the investment is made before the company reaches its revenue growth stage which can often be described as explosive.
Investing in Penny Stocks
Investors can consult with brokers before buying penny stocks. They typically charge fees for buying and selling as well a commission. This can be costly but may help with choosing quality companies to invest in.
An alternative is to use the Internet to your advantage. Many outlets will let an investor conduct transactions for a flat fee of just $10. Investors can save brokers' fees this way but the responsibility for selecting the companies to invest in also rest with the investor.
This does not have to be an obstacle. Picking the cheapest stocks to buy is a matter of checking the daily lists of emerging companies. When a company appeals, the investor can do research on the company, its officers and anything else that helps make an informed decision. A wise investor does not invest without understanding all the factors affecting his decision.
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