Before a person begins any type of stock market investment, it would be best if he finds some time and effort to learn the basics about stock market investing. Investing in a stock market would mean that the investors will trade stocks. Trading of stocks means selling or buying stocks in the market. This is the very basic about the stock market for beginners to understand and learn. When a person buys a certain number of shares of stocks, he will automatically become a a shareholder or a partial owner of the business or company that owns the stocks. As a shareholder, the profits that the company will gain will be shared with him in the form of dividends. However, if the company fails, the shareholder will also have to take and suffer the risks of incurring losses.
What are penny stocks?
Some people invest in penny stocks because these are easier to own, as penny stocks cost only less than $5 per share. This means that the investors who do not have big amount of capital may buy several shares at once. Those people who are planning to buy penny stocks must go to either an over-the-counter market or a pink sheet market, as penny stocks are not sold in major stock markets just like the regular stocks. However, since the penny stocks that are listed in pink sheet markets are not required to file their financial reports with the Securities and Exchange Commission, they are much riskier to invest into.
How to buy penny stocks?
Buying penny stocks is just like buying regular stocks. If the first time stock investors do not yet know how to buy stocks, he may opt to hire a discount broker or a full service broker to process the trading transactions for them. This is the same as with buying penny stocks.
The discount brokerage firm is the cheapest that we could find. They process the trading transactions, but they do not offer investment advice to the investors. Thus, the investors who plan to hire a discount broker must be aware about what he is doing already. Then he must also know which penny stocks to buy, as discount brokers do not make any suggestions which are the hottest penny stocks in the market.
Another type of brokerage firm that process the purchase transactions of penny stocks, which is ideal for the first time investors and those who are not confident in choosing which stocks to buy, is the full service brokerage firm. This type of brokers offer financial and investment advice to the investors. They provide a detailed stock buying guide to the investors, and help them choose which penny stocks to watch and buy. They also assist the stock investors in managing their investment account. The drawback, however, is that full service brokers are really expensive when it comes to commission rates and service fees. Thus, the investors who are planning to hire full service brokers must shop around for several brokers and find the one that gives the best rates and lowest fees.