It is important to always bear in mind that penny stocks are companies whose shares trade for under $1. They are risky investments and tend to be trading at such a price due to the company being in a poor financial state, meaning a future that is more difficult to forecast, and therefore more risk.
When looking for top penny stocks sites, one should first look for brokers that do not charge additional fees over and above the stock prices. This tends to be the one factor that the investor can control.
Main points to look for:
No additional charges for low-prices stocks: Some brokers will advertise their apparently “excellent/standard” transaction fees as part of their marketing, but avoid telling you that there are often added costs to low-priced stocks. Some sites also charge a percentage of the total trade value, whilst others charge a fee per share. Regardless, both ways the buyer will be getting charged more than they would for a typical blue-chip stock, particularly if the site in question charges a fee per share; since penny stocks tend to be purchased in large amounts.
Not unreasonable volume restrictions: Let’s start this one off with an example. Say you find a stock that you would like to purchase for 1 cent, and you plan to invest $1000 – this would mean you would be purchasing 100,000 shares. Any site that charges either for large trades, or demands that you split them up into multiple orders is not useful for penny stock investment. A reasonable benchmark would be to look for platforms that allow block orders of say more than 1 million shares to be subject to additional fees – this would mean that you could invest anything up to a cent away from $10k ($9,999.99) and avoid charges.
No Costly Add-Ons: due to the often aggressive nature of penny stock investing, a lot of sites demand that you upgrade to products such as premium accounts – these tend to be laden with additional platform fees and higher minimum balances. Some require that you place telephone order to a human broker, which can often result in high unexpected service charges. The main point: if you are looking to trade penny stocks, you should look to do so without additional costs and hindrances.
Low Minimum Account Balance: A lot of the time, people that are looking to invest in penny stocks are doing so because they do not have a large amount of capital that they are willing to or able to risk. This means in turn, that it is essential for a good penny stock site to have a low initial account minimum balance. Due to the unpredictable nature of penny stocks investments, it is not uncommon for penny stock traders to see their initial investment shrivel at a rapid rate – in other words, it is important that low minimum balance requirements are not just an offer on sign-up, but remain, in the event of a trade going wrong.
In summary, investing in penny stocks is about finding the best opportunities at the lowest price. It is therefore advisable to avoid large fees, commissions, and drawbacks that might normally be palatable.