Now that you have decided to invest in small cap stocks, you have to know the best penny stocks to invest in. After all, you want to profit from your investments while preserving your initial capital investment.
This early, you must understand that the top penny stock picks can change rapidly from one day to the next, which is yet another sign of the higher-than-average volatility of penny stock trading. Fortunately, you can apply these methods to choose the best stocks to pour in your investment money, take a tidy profit and repeat the winning process all over again.
Analyze The Company
This is similar to doing your research on the company offering the penny stock at the OTCC or at the Pink Sheets. More often than not, the best penny stocks to invest in will show favorable financial statements – solid cash flow, strong net income and stable assets for the last 3-5 years, to name a few desirable characteristics. A basic knowledge of financial statement analysis is very helpful. It is a small price to pay for informed and intelligent choices in penny stocks. Besides, you will be using the skills set in analyzing your own penny stock portfolio.
If you are wondering where to secure objective financial statements, the Securities and Exchange Commission, thanks to its Interactive Data to Improve Financial Reporting program, provides a wealth of information in this regard. Or you can check into the company website for its financial statements. Do not invest till you investigate!
Another way to determine the best penny stocks to invest in is to visit Internet forums, blogs and other websites where hot picks are made available to the general public. Of course, you still have to stock investment strategies for two reasons – one, you must beware since the advice provided may be fraudulent, promotional and naïve and; second, you must take responsibility for your trading actions.
Look for Patterns in Stock Movements
There are penny stocks that exhibit more-or-less predictable movements, which provide for an opportunity to grab profits at the right time and the right place. Of course, you will need weeks, if not months, of analysis of said trends before you can confidently pinpoint the best penny stocks to invest in and to profit from after months of some research.
Also, you have to be reasonably well-versed in analyzing data spanning many periods. To make it easier for you, there are mathematical tools to help with the analysis but like Internet forums, the final decision must rest in your hands. You have to search for the most profitable penny stocks to include in your investment portfolio. These will not come falling into your lap, ready to be milked of its profit potential, far from it.