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The Dow is off to a hot start this year, surging 14% higher already. If you want to take advantage of the momentum, here's one of the best penny stocks to buy this week.
In the first week of April alone, the Dow Jones Industrial Average skyrocketed 496 points – putting it within 1.5% of its record high.
Blue-chip stocks are also putting out respectable returns with the ebb and flow of the market, but your returns could be doubled or tripled with one of the best penny stocks.
Penny stocks are stocks that trade for $5 or less. Even the smallest price swing means a penny stock could see double- or even triple-digit gains in a short few weeks or even days.
Just look at Vital Therapies Inc. (NASDAQ: VTL). In March, the company's share price surged 160% after news of its merger. The share prices started at $0.21 but shot up to $0.30. Investors that got in early on the action made a considerable amount of cash on a pretty small investment.
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And while that's exciting, we have an even better buy for retail investors this week. But before we get into the best penny stocks to buy, we have a few tips for safely buying penny stocks…
Read This Before You Buy Penny Stocks
Investing in penny stocks requires a bit of discretion and a few rules. While you can see big gains with the right penny stock, you also stand to have big losses as well.
One wrong stock choice, and you could end up the victim of a scam or learn you've purchased shares from a fake company. Pump-and-dump schemes are unfortunately fairly common, and you want to avoid them at all costs.
Fortunately, Money Morning has created a guideline for retail investors to safely buy penny stocks and protect your hard-earned cash.
Best Penny Stocks to Buy, Rule No. 1
Retail investors should make sure they isolate their investments to stocks that trade on major exchanges like the Nasdaq or the New York Stock Exchange. So, make sure you avoid the pink sheets or over-the-counter exchanges, where oversight is lacking.
If you find yourself selecting stocks on smaller exchanges, just know you're picking from riskier and more volatile investments.
Best Penny Stocks to Buy, Rule No. 2
You want to find stocks that are receiving some positive attention from analysts. If there aren't any analyst ratings, this could be a red flag.
If you do see analyst ratings, only get the penny stocks if they have "Buy" or "Hold" recommendations. But also make sure you look at the higher price target for the stock so that you have an upside.
Best Penny Stocks to Buy, Rule No. 3
Next, you'll want to look for stocks in hotter sectors or find a company that might be a target for breakout growth. These sectors include everything from biotech stocks to technology stocks, cannabis stocks, and other breakout contenders.
Penny stocks in consumer defensives likely don't have the sort of upside you're looking for.
Best Penny Stocks to Buy, Rule No. 4
Finally, keep a close eye on your budget with penny stocks. At the end of the day, these are risky investments. So, you should limit your exposure by only putting a small portion of your portfolio into these stocks.
If you follow these four rules, you stand to see solid success when investing in penny stocks.
And today, we're giving you a head start with the best penny stock to buy right now…