Penny Stocks in 2022 – What You Need to Know

How do you make money with penny stocks? With so many options out there, it can be difficult to decide how to make money with penny stocks – but the potential payoff can be significant if you get in on the right opportunity and ride it out for the long haul. In this article, we’ll explain what penny stocks are, and give you some tips on how to find the best penny stocks to invest in as an individual investor.

​What are penny stocks?

While ​penny stocks are risky, they can also be extremely profitable​ if you invest wisely. ​But where can you find penny stocks? How do you go about purchasing them? Who are some of these companies and why are they traded on a penny basis? If you’re interested in learning more about penny stocks, keep reading; we cover it all. Check out our informative guide today.

​Risks involved with penny stocks

Penny stocks, also known as micro-cap stocks, are stocks issued by companies with a market capitalization of less than $250 million. Despite their small size, penny stocks can be more lucrative than larger shares. However, because of their fluctuating prices and relatively low trading volumes (the result of which is fewer chances for institutional investors to buy and sell them), these small-cap stocks can be risky investments. Penny stock trading carries higher risks compared with conventional investments such as large cap stocks; because they are less liquid, it is difficult to sell off shares quickly and at an acceptable price when needed. Penny stock trading also comes with greater fraud risk owing to lack of transparency in terms of information disseminated about companies that issue these securities.

​Are penny stocks legit?

​ Penny stocks have a bad rap. Many people assume they’re for shady day traders and get rich quick types, but that doesn’t have to be true. Penny stocks are real companies, after all, and there are certainly legitimate ways to earn money with them. If you don’t believe me, read our guide on what penny stocks are, why you should consider investing in them, and how to trade penny stocks online at sites like Questrade or Poloniex.

​How do you invest in penny stocks?

The easiest way to invest in penny stocks is through online brokerages. Once you have a brokerage account, you can buy and sell stocks on any stock market that your brokerage offers. For example, if you want to invest in penny stocks, you’ll need an account with a broker that trades penny stocks. Before opening your account, talk with a financial adviser or visit your brokerage’s website for information about its trading platforms and any special requirements needed to invest in specific securities (like small caps or penny stocks). In addition, talk with some of your friends who trade; it might be helpful for them to give you some tips.

​Penny stock scams to watch out for

When it comes to penny stock scams, there are a lot of red flags to watch out for. Companies with features like low share price or small market cap are almost always cheap for a reason. If it sounds too good to be true, or you see lots of buzzwords but don't understand what they mean—or even if it just feels weird—it's best to steer clear. For example, penny stock scammers often pump their shares using paid articles that appear on sites like Yahoo! Finance and MSN Money. If you see big articles on reputable sites touting stocks with few details, that's a red flag right away!

​Tips on how not to get scammed when trading penny stocks

​Penny stocks are not meant to be traded by small-time investors because, more often than not, penny stocks are all about hype and nothing else. However, if you want to start investing in penny stocks, you should do a little bit of research on how to do it right so that you don’t get scammed. One thing you should know is that pump and dump schemes are common with penny stocks so keep your wits about when trading them. A good tip is to stick with low-risk investments that come from big companies—or at least companies with a reputation for stability. If something seems too good to be true when trading penny stocks, it probably is—don’t fall for hype!​

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