Are you confused as to which penny stocks to buy now? Most people are! First of all you need to ascertain if you are game to invest in penny stocks. Stock trading is interesting and there are various stocks that you can trade in. One of them is the penny stock.

Whats is a Penny Stock?

Smaller new companies sell their shares or stocks in order to finance their expansion plans, facilitate basic operations or even initiate a new start-up. These stocks are sold prices that rarely go above the $5 mark. Sometimes you will find good cheap stocks to buy for as low as a fraction of a cent. Various stock market information providing websites and stock brokers would be able to provide you with lists of top 10 stocks to buy now. You can even get best stock to buy for 2011 lists through subscription services too. You can begin investing in penny stocks with just a few dollars.

The downside of investing in these stocks is the element of risk involved. Penny stock trading is extremely risky. It is commonly observed that big investment firms rarely trade in them. The main reason for this is that research establishes that almost 70% of those who invest in stocks like these lose money. When you invest in stocks such as these, it is very likely that you will never get to the stocks and can almost be sure of losing your initial investment. To make matters worse, penny stock trading is riddled with dishonest practices and fraudsters.

Nevertheless, the profits that can be made through investing in penny stocks is huge. Many of them are sold and bought for prices as less than a penny and rises to cost several dollars giving the investor incredible profit. Though the risks are high, the profits are too.

Risks Associated with Purchase of Penny Stock

There are several risks associated with trading in penny stocks:

•    Sometimes the company you invested in can disappear completely or even go bankrupt. If the stock that you purchased was selling at less than a dollar, it is very likely that it can disappear even if it was listed in one of the penny stocks to buy now 2011 lists that pop up all over the Internet.

•    There is a lot of dishonesty and fraudulent practices prevalent in penny brokerage firms. Some of them can charge markup and even trade without approval from you. There can be instances when they will be totally unreachable and absent if you want to sell stocks that are losing ground in the stock market.

•    Penny stocks are not easily available and so you would have to resort to getting them through penny brokerages. Your regular broker might not be able to help you with penny deals. Most of these stocks are sold over the counter and you would need expertise in the form of penny brokerage firm to ensure that you are not being defrauded, overcharged or manipulated.

•    Penny stock companies would be practically new start-ups and not established. Hence getting research material on them would be a daunting task. Your only option would be to rely on information provided by the brokerage firms and accept their stock quotes as genuine. Moreover, you might be charged extra for the information you seek.

•    List of best stocks for 2011 might not be easy to acquire except from brokerage firms. Thus, you are totally dependent on the firm for all your penny stock trades. Hence choosing a reputed brokerage firm, claims precedence over all other matters in penny stock investment.

How To Invest in Penny Stocks Safely

Investors planning to invest in stocks of the penny type should:

•    perform research on brokerage firms carefully

•    stay away from brokers who claim to promote penny stock trading

•    invest in companies that have good business models and hence potential for success

•    brokerage firms and brokers can artificially create a price rise

•    limit your investment in penny stocks to only 5% -10% of your total investment portfolio

•    invest only the money that you can afford to lose in purchasing penny stocks.

Penny stock trading is ideal for short term trades as these are not stocks with high dividends. But there is no harm in trying them out. They are available in almost all sectors like energy stocks, bank stocks, technology stocks etc . Solar stocks and gold stocks might not be easily available as penny stock.

Stock Investments – Risk Taking Ability

Penny stocks are shares of public limited companies which fall under the micro-capitalization segment. They have limited liquidity. With all the cons associated with investing in penny stocks, its a wonder that many people do so. The answer lies in the lucrative returns that investors can hope to acquire.

You will come across many best stocks to buy 2011 lists which would make your choice of shares easier. It is advisable though, to get acquainted with all paraphernalia associated with finance and stock market,  analytical skills, financail judgement etc, prior to putting your investment on some of the best stocks to buy now in the penny stock sectors. Be ready to pay more in terms of brokerage and commission since penny stock trading brokers charge more. Thus be sure to include this element in your investment calcualtions.

Penny stock trading is best done with help from professional brokers and investment firms since it si cumbersome to be done all by yourself. Self-managing accounts of your stock investments in penny stocks is rigorous and complex. So brace yourself and get help from financial experts prior to taking the leap in to the stock market.
 
You can practice safe penny stock investments if you have a good, reliable penny stock investing firm on your side that meets your financail requirement queries in an appropriate manner. Stock investments are risky and more so if they are penny stocks, nevertheless, if you can cushion the risks, the profits are profound.