How to Pick a Good Pennystock

Pick good penny stocks and make money.

Penny stocks are shares--or pieces of equity--of a particular company. What separates penny stocks from other stocks, however, is the fact that each share can be purchased for less than $5.00. The advantage of penny stocks is that you can purchase a significant amount of shares without having to spend a lot of money. If the shares increase in value, you will realize a profit fairly quickly. Unfortunately, the majority of penny stocks are cheap for a reason, and they may not increase much, if at all, in value. You should always use caution when investing in the stock market, and consult a professional if you have any questions.

Instructions

1. Find a company that offers a popular product or service. It may not be your favorite thing, but if you can picture it selling in today's market, it might be a good investment. Do some research to find out which industries are prominent in the market right now, and have the potential to stay prominent in the long run. Small computer companies, new websites or small green energy businesses are a good examples of these types of companies.

2. Check the company's balance sheet. A balance sheet has every loan, purchase and profit the company has seen. The balance sheet should equal zero at the end of the day, and it's always helpful to see a steady profit on the balance sheet. If, however, the balance sheet is disorganized and doesn't level out, stay away from investing in their stocks.

3. Check with a reputable investment magazine or firm to see which penny stocks they recommend. This is far from a guaranteed win, but it can definitely help you get moving in the right direction. Look at Forbes magazine or visit websites dedicated to penny stocks and compile a list of potential companies in whom you would like to invest.

4. Practice with a stock trade simulator found on many stock websites. Here, you can pretend to buy a company's stocks in real time, at real prices, and keep an eye on them. You can see how well you pick stocks without having to invest any actual money. After you get the hang of practicing penny stock purchasing, try it for real.

   Purchasing penny stock can be fun and profitable, as well as a good way for beginners to learn about the stock market.

References

• Pennystock.com: How to Pick Penny Stocks
• Investopedia Stock Simulator
• TradingSimulator.net: Stock Simulator