Penny stocks are becomming a bigger and bigger deal in he stock market today. You hear many stories about people becomming rich quickly with the aid of penny stocks. I'm sure if you have invested in the stock market you have received mail about stocks that have doubled or tripled in value in a matter of months. You have to be careful with penny stocks. Though they may be a good way to double or triple your money in a very short period of time, they are also a good way to loose all that you have invested in them. This is why when investing in penny stocks you must only invest an amount that you would not be afraid to lose.

That said, it is also good to spend some time looking at and investing in penny stocks. It is a great experience and, if researched right, can also be a very profitable one. As I said be sure to only invest what you can afford to lose, maybe a couple hundred dollars, that way it will not be a gigantic blow to your retirement fund if the stocks go belly up. With most penny stocks, though, a couple hundred dollars might buy you 1000 shares that could be worth five dollars a share two months down the road. You may say that 5,000 dollars is not getting rich but when you think of the percentage increase that your money made in a matter of months, that is when you see the value of penny stocks.

To be qualified as a penny stock a share does not need to be worth just pennies. A stock that is worth less than five dollars a share is usually referred to as a penny stock. There are some solid companies that have stock worth less than five dollars a share. At the time this article was written, Rite Aid stock was worth less than five dollars and they are a solid expanding company. They are building 800 new stores and expanding older ones. This would make that stock a good investment. On the other hand, a company like this may not be considered a penny stock as much as a long term investment as they have the potential to be worth $50 a share but that will not happen in a matter of a few months.

There are thousands and thousands of penny stocks to choose from when looking into investing in some. You have many many choices as to what to buy. Many of the penny stock companies have not been around for a long period of time so they do not have an extensive company history or stock history. This is what makes penny stock investing difficult. Penny stock investing is mostly luck of the draw with a little bit of educated buying. It would be foolish to invest in a company that will obviously go bankrupt but a seemingly good company may go bankrupt just as easily over night. This is why I stress that you must not invest more than you can afford to lose in the penny stock market.

A good strategy for the penny stock market is to build off your profits. Lets say that you pick a good stock that doubles in 3 months. Say you invested $200 in that stock and you now have $400. Now you can take that $400 and invest it in other penny stocks. I would recommend that you pick maybe two different stocks, that way if one does bad, the other might do good and balance things out. This way you can keep building on that original $200 investment and that is all that you would lose if you happened to lose all of your penny stock investments sometime down the road. On that same note, I would also recommend that if your penny stock portfolio becomes quite rich with money, take some of that and put it in a safer investment like a long term stock or maybe real estate. This way you can insure that you will have made a profit from your penny stock trading no matter what happens.

Penny stocks are something that you want to be concerned about and watch the price of every day. A penny stock may double in value in one day and split in half the next. It is difficult to know when to sell a stock but you have to go with your instinct. Maybe the day after you sell it will double in value again but maybe it will be worth a tenth of what it was too. You must not concern yourself with the price of the stock after you sell it, this will only cause unneeded stress.

The bottom line on penny stocks is they are a great way to possibly quickly build some wealth but they are also a great way to lose all that you have invested in them. With penny stocks you must remember to take is slow and only invest what you can afford to lose. You must also remember to watch the prices every day and sell the first moment you think the stock will not go any higher. Do not get greedy and think, "Maybe if I hold on a little longer it will go up more," often if you hold on to it too long the value will drop and you will lose money. If you double your money, take the profits and invest it elsewhere.

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About the Author

Doug Beavers, Web Designer and Investor

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