Your Questions About How To Invest In Penny Stocks

Lisa asks…

penny stocks?

Is it a good time to invest in penny stocks and if so where can I find information about available stocks and how do I know which stock to buy?

John answers:

In my opinion, penny stocks are never good investments. The only people who have any real success with them are those who make markets in them (check out the firm Hill Thompson Magid), otherwise any type of gain you make from them is negligible and the success ratio with them as opposed to small-large cap companies is a lot lower. I’d recommend staying away from them at all costs; they’re only trouble for individual investors.

Donald asks…

What are good penny stock newsletters?

I am looking into investing in penny stocks and I would like to subscribe to some newsletters as well. I have heard a lot about bullrally.com’s newsletter and how good it is, but I was wondering if anyone else had some others to suggest? Thanks in advance.

John answers:

The stocks you want to focus on is consumer staples, consumer discretionary, and healthcare. These are DEFENSIVE stocks that will survive through good and bad times. Most of my positions are in these stocks. Some names include 3M, Procter & Gamble, Kimberly Clark, Exxon Mobil, Walmart, Costco. Everybody’s got to eat and wipe their butts regardless of the state of economy. Many of these companies survived through the Great Depression.

That’s the benefits. You can sleep at night knowing your money is doing well. There are NO guarantees that you won’t lose money. It’s just that these stocks are the best. They pay good dividends too.

Sharon asks…

Which Company stocks should i invest in?

Im in 6th grade & i am playing the stock market game my school is playing against other school and other teams in our school, AND I REALLY WANT TO WIN! So i am asking what companies i should invest in just list a few check the stock market see whos doing good & it doesnt matter how much a share costs just tell me an AMERICAN company that has its own stocks & shares & i would be happy to name the best answer with the answer who has everything want. you may also have to check previous years on those stocks. AND I CANNOT INVEST IN PENNY STOCKS! thank you very much for your time & answers!

John answers:

Check this link and see if you find something: http://www.businessweek.com/investing/content/jan2009/pi20090128_440837.htm?chan=investing_investing+index+page_stocks+%2Bamp%3B+markets

David asks…

Penny Stocks?

I would like to start investing in Penny stocks. I have an account with Scottrade.com.

1-Is there any tutorial or comprehensive book for penny stock investors?

2-I have heard about softwares that help you in deciding when to buy and when to sell. Is that true? If so, what softwares do you recommend.

3-I searched for some information on the Internet and I came across pennystocks.com website. This site and others claim that they can help you in deciding when to buy and when to sell, how true is that and would it be beneficial to join one of these websites to maximize the profit.

Thanks.

John answers:

I have been doing it for about 6 years now,and i have done well with it.

1) only buy stocks on the 3 exchanges (NYSE,NASDAQ,AMEX)
2) buy between $1.00 – $3.00 a share.
3) no more then 15 million shares outstanding
4) positive earning per share (EPS)
i use the yearly numbers and not quartly numbers
5)buy at least a 100 shares worth.
6) sell 50 shares when the stock doubles in price. This takes your money off the table so to speak. Then you buy another company.
7) buy at 50% the book value of the company.(shareholder equity divided by # of shares outstanding)
8)current ratio of 2.0 (current assets divided by current laibilities)
9) little or no long term debt.

If you stick these rules you should do ok.

Thomas asks…

About Investing. Is it possible to start with $100 for Penny Stocks How does one avoid Scams?

Is it possible to invest in Penny Socks for on;y $100.00 start out? I have seen where lowest amount is $500. I have to start some where and this is all I have right now

John answers:

I wouldn’t say penny stocks was investing, more gambling. There is a huge difference between trading and investing. Trading is almost identical to gambling and you will probably lose.

Investing is usually long term were you buy a particular good value stock you have heavily researched beforehand in an area you are familiar with, then you sit back and forget and just let the dividends reinvest automatically.

Usually for such low amount it would be known as a Dollar Cost Averaging Plan that you would set up and it would take that same amount each month and automatically invest it for you on a certain day each month along with bulk investments from other investors as well. They usually do this sort of arrangement for a low fee of only a few dollars but you will need to check different financial institutions to see what is available in your area where you live.

Some may charge a quartely or annual fee in addition which is something to watch out for especially if its only low sums involved as it could eat into your investments. It is best to find somewhere that doesn’t charge additional fees other than those of the execution only, and avoid anything to do with trading, day trading and stock robots at all costs.

If you wanted to just make one investment in one company and not have a Dollar Cost Averaging plan it would probably be better to have $500, $750 or $1000 to invest as the fees for just one execution only trade may be higher and if the amount you’re investing is only low then it would eat too much into your investment already. The lower the amount you invest the more the fee for executing the transaction will eat into your investment.

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