Finding the Top Penny Stocks to Watch

Anyone who has ever thought of investing or researched the topic online has probably been bombarded with information on penny stocks. Penny stocks are small-cap investment opportunities that come with a very low selling price. Rarely do they cost a penny though, as the SEC classifies anything under $5 as this type of stock.

Most don’t appear on the NASDAQ and NYSE, although some on those exchanges sell for this price range. Many consider penny stocks to be the untamed newcomer to the game and lacking in the glitz and media coverage seen with larger stocks. With this being the case, why are many individuals now looking for the top penny stocks to watch?

First and foremost, there are some big winners and losers when it comes to penny stocks, and there is more risk associated with this type of investing. Individuals turn to their stockbroker when they wish to make a purchase or sale, but must be aware that some services do have listing requirements. These requirements provide the service with an air of legitimacy in an industry that many believe is full of corruption.

Individuals find they can gain significantly, over 1,000 percent, within a short period of time, if they choose to invest in penny stocks. The key is knowing which stocks to invest in, as the market is lacking in reporting standards and liquidity. Low trade volumes have a major impact on the share price of a stock, as it may be hard to divest of a stock once it is owned.

Certain services demand any company registered with them keep up with their SEC filings, and it’s best to find a company that does so. The problem is that the requirements for these filings are minimal, as compared to what exchange-traded companies must provide. Stockbrokers are required by law to share this information with investors, to ensure the investor understands what he or she is getting into.

Picking the right stock requires the investor examine the service’s financials, their footnotes and their underlying business. Learn if the company files in a timely manner, who audits them and if their finances appear healthy. Read the footnotes to learn more about the business. Finally, make certain the company is legitimate and isn’t a shell corporation. Doing so helps to protect the investor’s hard earned money while allowing him or her to make a profit.