James asked in Business & FinanceInvesting · 9 years ago

Need help with investing in Stocks (Penny Stocks)?

I'm about ready to invest in stocks. I'm 17 years old, and i'm starting to look into penny stocks to invest in. When deciding which stocks are good, I look at the charts (recently, yearly and since the beginning) as well as their description to see if they are good to invest in. Am I on the right track? What else should I look for?

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  • 9 years ago
    Best Answer

    Actually the possbility of losing money is much higher in penny stocks than stable ones. Simply because the company may go bankrupt at any time. Over the years, most of penny stock companies %80 - %90 goes to $ 0.

  • John W
    Lv 7
    9 years ago

    No, you're not on the right track because you've decided to start with penny stocks. It's a lot trickier to invest in penny stocks because of liquidity issues, the potential for manipulation and the fact that the companies are harder to research.

    The other error you've made is assume that you just look at the charts. These are businesses that you invest in not lines on a computer monitor. Now it is believed that all information will be represented in the stock prices and hence on the charts but you actually want that information before the market prices it into the stock price so you need to try and get to know the business, not the chart.

    You need to understand risk and what degree of risk is suitable. Many people talk about risk tolerance but there's also the fact that although reward does increase with risk, the risk will eventually cancel out the reward so there is an a limit as to how much risk to accept for optimal growth of your portfolio never mind a limit to your risk tolerance. For example, if you had the opportunity to wager on a 50/50 coin toss where if you won, you would win twice your wager and your wager would be returned to you while if you lost, you lost your wager. This would be a money maker because for every $1 wager, there's a 50% chance you'll have $3 and a 50% chance you'll have $0 which means on average you'll have $1.50 for every $1 wagered. But what happens if you bet all that you have with each coin toss, you lose everything with the first loss and it's game over. You can ruin a favourable opportunity by over betting, so what is the optimal for the growth of your net worth, with the coin toss, it's 25% of your available funds with each coin toss, I'll leave it to you to figure out why.

    It would be better to start with the stocks of large well known companies because you're more likely to know something about their business. They are large so the numbers on their reports are more representative of what's actually happening, it doesn't take much on a penny stock to make the report look good or bad so the numbers are meaningless on penny stocks and the large companies are more likely to have the resources to overcome the challenges that face them.

  • Yvonne
    Lv 4
    4 years ago

    A penny stock can make you alot of money in a short time if you do it right. You have to be willing to risk the loss of the money though. I own some stock that I bought just for the reason that I am pretty sure it will go up alot in the next few months. It is not quite a penny stock($2.00) but it is dirt cheap. I am willing to lose the money though to take the chance on such a big gain in a short time. Good Luck!

  • 9 years ago

    Looking at charts is the best way to evaluate stocks. A newbie looking to invest in penny stocks is.... a terrible idea.

    Penny stocks (story stocks) always sound like a winner... until they fall apart. The volatility, liquidity and lack of real, verifiable information make them, as a group, a terrible investment. Unless you've got 3-5 years very successful experience trading stocks over $5.... stay clear. Keep in mind, in can take years to learn to trade anything.

    On a better note. It's time for you to start learning "Technical Analysis". That's the art/science of evaluating stocks (or almost any other traded asset class). I believe the "Dummy" series has an intro book to the subject. Be warned....... once you start... you'll be reading books on this subject for years.

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  • I have done a few penny stock buy always have trouble paying the commissions, young kids are usually good at picking stocks based on a new toy or clothing trend. There maybe a new video game that is the next big thing, I think you should try to find your stock that way, good luck!

    Source(s): I have a etrade account
  • Anonymous
    9 years ago

    I am not sure if you can set up a brokerage account without parental consent until 18. Having said that...I have set one up for my daughter how is now 12 and yes, she does have an investment in penny stocks. However...the only reason that we invest in penny stocks is because we have done a lot of due diligence, and a lot of education on this particular investment. Penny stocks are not for the faint of heart in investing. Furthermore, like with all investing I would suggest diversifying as much as possible.

    Much of my education comes from ex-wall street giant Kip Herriage. He happens to publish one of the top on line financial newsletters available and you can go to http://www.Crash-Proof-Prosperity.com

  • Anonymous
    5 years ago

    Penny stocks are loosely categorized companies with share prices of below $5 and with market caps of under $200 million. They are sometimes referred to as "the slot machines of the equity market" because of the money involved. There may be a good place for penny stocks in the portfolio of an experienced, advanced investor, however, if you follow this guide you will learn the most efficient strategies https://tr.im/4ed13

  • jpvskv
    Lv 5
    9 years ago

    I suggest that you invest in One Troy Ounce Silver coins/rounds instead.

    You don't have to be 18. They are only about $34.54 (today's 3/17/11 SPOT price, plus a commission or overhead of $1 to $3). Go to Kitco.com and look at the historic charts there.

    Silver has NEVER BEEN WORTH NOTHING!

    It is going to go WAY up in value and will as our US dollar goes to ZERO value.

    Look up "Hyperinflation" and "silver investing" on youtube and/or your favorite search engine.

  • Anonymous
    9 years ago

    FIrstly i would suggest you to wait for being 18 years. Rather than that if you want to invest in stock market just have some knowledge of it. read books, articles, press releases regarding Stock Market. if you wanna invest in Indian Stock Market then Intraday and FNO are much chooser categories.

    STock market basiscs you will get here:-

    on my blog and various other tips and tricks how to invest in Indian Stock Market

    Following are the links provided for u in Source column, inorder to help you.....

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