How to Find an Ideal Penny Stock Broker ?

Rabu, 08 Juli 2009

Penny stocks are low priced speculative securities of small companies regardless of market capitalization or whether they are traded in securitized exchanges like NYSE or NASDAQ or an over-the-counter (OTC) listing service such as OTCBB or Pink Sheets. Penny stocks are also referred to as microcap stocks, small stocks or nano stocks.
Several investors get attracted to penny stocks since these stocks are priced low. However, financial experts consider penny stocks as high risk investments. They can create enormous amount of wealth within short time and can also result in heavy losses within days. Penny stocks have the potential to get doubled or tripled within days or weeks. Apart from this, there are other risks involved including limited liquidity, high degree of volatility, lack of reporting and increased vulnerability to manipulation by management and market makers. Stocks trading on the Pink Sheets are least regulated and have no minimum accounting standards. Investors and share holders are not notified of any type of information including changing ownership of shares and other changes that can affect the financial viability of the company.

Due to these risks and high degree of fluctuations, penny stocks are ignored by large brokerage firms and stock brokers. Most times, information like current price and the number of shares traded are not made available to the public. Even the pink sheets are available only to brokerage firms. Hence, it is very difficult to get information on penny stocks. However, if you want to buy penny stocks, you can look into newsletter sites published by penny stock investors. There are also websites such as Yahoo Finance that help in finding penny stocks.
Penny stock brokers are just like the rest of the portfolio managers. They make sure that you can invest your money into the right stocks—where you can gain the most and lose the least. However, what sets penny stock broker apart is that he does not deal with huge amounts of funds. In fact, he only manages a share of $5 and below. This is ideal for those who are starting out with stocks and do not want to take the risk of investing too much. Your broker will be your perfect ally for a sound investment.

How to Choose the Right and Desirable Penny Stock Broker

There are over thousands of penny stock brokers who will be after your account. This means that you do have plenty of options. However, not all of them could be ideal for you, one way or the other. In fact, some of them are even cons who can simply run away with all your hard-earned money. Thus, it is very important that you do have some criteria when it comes to choosing the best penny stock broker for your investment. When you don’t have any idea of these characteristics, you can begin with the following:

1. Go for a full service penny stock broker. This is appropriate for those who are novices in investing in stocks. Full-service penny stock brokers are perhaps one of the most expensive in the market; however, you are assured of full services. They will not only tell you where to invest your money but also help you understand why. This way, in the future you can make better and wiser decisions for yourself. With discount brokers, you will have to make the research on your own, leaving a lot of room for huge errors.

2. Ensure that he can handle a lot of your portfolio. It is not mandatory to have one broker for all your accounts, but you might as well do. It would be very difficult for you to keep track on the movement of your investments or even reach your penny stock broker. When there is only one, you can just ask for a report anytime you want to. Moreover, for accountability, you want to limit your penny stock brokers. If something goes wrong with your transaction, deliberate or not, you know who to ask—and who to blame.

3. He must be reliable. There are a lot of ways on how you can gauge the reliability of your penny stock brokers, but the point is that he never fails to make himself trustworthy. For example, he extends efforts in making sure that his computer does not suffer any breakdown once he starts to trade. He will also be convenient to talk to whenever you have issues or questions about penny stock trading. Moreover, he must be clear with his policies. This should be practiced when it comes to commissions.

Penny stock brokers are the way to go for less-risky portfolio investments. When you’re looking for the most ideal penny stock broker, take note of the above-mentioned factors. This way, you will never go wrong with your choice.

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