Penny stocks are those stocks that cost only a few pennies per share. These cheaper stocks are often thought to be a great way to get started with building a share portfolio or to develop a trading strategy using only low amounts of capital.

The primary reason these particular stocks is so cheap is because they are portions of smaller companies or perhaps even newer companies to be listed on the stock market. This also means they’re not as prominent on the stock exchange as some of the shares from much bigger corporations.

Before you jump into buying any stocks, it’s important to research into finding the right broker for you. Always check how much your broker will charge you for each trade you place. Some brokers charge a flat fee for transactions while others charge a percentage of the trade value.

As penny stocks are so cheap by comparison to bigger companies they can be quite inexpensive to get started. The amount you need to deposit into your trading account is quite low - usually starting from only $150.

The great thing about investing in the stocks of smaller or newer companies is that there is potential for those companies to grow into giants over time. This can see your initial investment of cheap penny stocks skyrocket into the hundreds of dollars per share.

Unfortunately, the opposite is also true. Smaller companies also have the risk of failing so your stock values can plummet down to zero just as quickly as they could rise.

Finding the right penny stocks to add to your portfolio can sometimes be a little more challenging than sourcing the more well-known stocks that are shown often all over the media. There are thousands of different shares listed on the stock exchange, so sorting through these to find the right ones to add to your portfolio can sometimes take a little patience.

Some brokers may recognize your effort to locate penny stocks and begin recommending different shares for you to buy. Always remember that a recommendation is not a command to buy. The decision to add stocks to your portfolio must always be yours and yours alone. Spend time doing your own research and crunch the numbers yourself before making a decision.

While investing in penny stocks won’t make you rich overnight, you can easily begin to build a share portfolio with only a little money of your own. Understand that there is much more to investing than just trading to realize the capital profits and understand how potential dividend income from your shares could also increase your future portfolio’s overall value.

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