How to Invest in Penny Stocks Have you ever had a "friend" come up to you with a hot stock tip on a small company and try to get you to invest? They might tell you that they "got in" a few weeks ago and already they've doubled their investment. You start to get interested as you don't want to be left out on the opportunity of a lifetime. You take the plunge and now you're an official shareholder. Chances are you just bought a penny stock. There is no set definition of what constitutes a penny stock. In general, shares sell for less than $5.00, often for less than $1.00 per share. Companies have a market cap (price per share x number of shares) of under $200 million and the company has no more than $4 million in tangible assets. Penny stocks trade on the OTC (Over the Counter) market and are subject to great volatility and wide price swings. So, how do you invest in Penny Stocks and make money in the stock market? You must learn as much as you can about any stock you invest in. This is especially true when investing in penny stocks. Probably your best chance of picking a winner is if you have personal knowledge of the company you are considering. The penny stock of the company you work for may or may not be a great investment, but at least you'll have first hand information about the company. Maybe they are anticipating landing a big contract. Is business good? Is management competent? These are important questions you probably can answer with some confidence. It's more likely that you don't have access to this "inside" information. With the use of the internet, you can find out quite a bit of information about just about anything. Publicly traded companies, even relatively small ones, must have financial statements publicly available. Whether you go to Yahoo Finance or a service like EDGAR online, you should be able to see their balance sheet etc. It is also a good idea to visit their website and see just what they do. You can even write to the company and ask them for information. It is not hard to invest in a penny stock. You can start by finding a broker or discount broker that you feel comfortable with. Online discount brokers like TD Waterhouse, Etrade-Canada and Scottrade are all good choices. If you don't need much help and like to make your own investment decisions, you'll save money by using a discount broker as opposed to a more traditional broker. Otherwise, choose a broker from RBC Direct Investing or any number of other full service firms. Making money with penny stocks is not easy. Allow maybe 10% of your portfolio for this speculative area. Don't be greedy and take profits when you can. A 50% or more move in the daily price is not unusual. A move of only .10 might represent a 50% gain. So, watch carefully and don't be afraid to sell.