That's because it only takes one piece of good news to send penny stocks skyrocketing.
For example, let's say you bought a penny stock for $1, and its share price rose by $0.50 per share. That would result in an instant 50% return on your investment.
Of course, when you consider large-cap stocks move by dollars a day, these may sound like easy windfalls. But the reality here is that it can be hard to find the best penny stocks to invest in.
You see, there are close to 3,000 stocks that trade at $5 or less (penny stocks) on the NYSE and Nasdaq alone. But this doesn't even account for the thousands of stocks you can find on over-the-counter exchanges (OTC).
And while some penny stocks have insane, money-doubling potential, others could be scams.
Fortunately, Money Morning can help you pick out the winners from the losers when it comes to penny stocks.
Below, we'll not only show you a few rules to follow when investing in penny stocks, but we'll also show you one of our favorite penny stocks to buy right now that could gain over 85% in the next 12 months…
While penny stocks could potentially double your money, not all of them are great investments.
That's why we've created four simple guidelines for investing in penny stocks.
First, because penny stocks are speculative investments, it's important to only invest what you can afford to lose. At best, we recommend no more than 10% of your portfolio.
Secondly, look for penny stocks that trade on major exchanges rather than the riskier OTCs. This is because OTCs – or pink sheets – don't have to meet the same, strict, requirements that those listed on the NYSE or Nasdaq do. This'll limit your penny stock choices, but you'll also find much safer choices.
Third, you'll want to find penny stocks that have a lot of information and data available. Some of this may include information from analysts, like bullish price targets. And even though penny stocks might not always hit their target high price, it does mean the firm shows potential growth.
Fourth, look for penny stocks in popular markets or emerging industries. It could mean they're ripe for a buyout. And even if a firm isn't profitable, it could be considered one with huge potential.
These are great tips for staying safe while uncovering the best penny stocks to buy, but it also doesn't hurt to get some help, either.
That's why we're bringing you our top penny stock to buy now.
This is an oil firm that's profiting from the United States' record-breaking oil production.
In fact, this firm could grow more than 85% over the next 12 months. And it's only trading at $1 per share right now…
Get our list of the 7 best stocks to buy before the market recovers - you might never get another chance to buy great stocks at such low prices again. Click here...