Finding Penny Stocks

• There are a number of penny stock screeners on the Internet. Both Yahoo! and Google Finance have stock screener; however, Yahoo!'s is more robust. Enter in a maximum price to see which stocks match your criteria. Enter a price of $5, and drill down from there. You can also use Pink Sheets and the OTC Bulletin Board (OTCBB) to research penny stocks. These are both exchange houses designed for micro-cap stock which may not qualify for listing on the major exchanges.
  
  

Getting Started

• Getting started is relatively easy and requires little capital. To buy or sell penny stock, set up a brokerage account if you do not already have one. Setting up an account is easy. Set up an online discount account or an account at a physical brokerage. Call or visit the firm online to download forms to open the account. Also use the Financial Industry Regulation Authority (FINRA) to conduct a background search before signing up. See Resources below for link.
  
  

Risks

• A general lack of public information surrounds penny stocks. Unlike large public companies that are required to file a 10K, companies who sell penny stocks are not required to provide public financial documentation. Lack of public information is the primary reason behind the high incidence of fraud in penny stock investments. Also, no minimum listing requirements are required for assets or the number of shareholders as is required by NASDAQ or NYSE. In general, penny stocks have no proven track record for success, so companies tend to have no operations and/or products which are still in the development stage. Finally, beware of the lack of liquidity in the market. Trades in low volume stocks have a greater impact on stock prices than high volume (high liquidity) stocks.