How to Invest in Penny Stocks Online

By Amber Kelsey

Penny stocks are stocks that cost under $5 a share to buy and sell. Investing in penny stocks can be risky because they are usually offered by new companies that are trying to raise capital. Penny stocks also tend to fluctuate in price and have a low track record. However, the low cost of penny stocks makes it easy to play the stock market for just a few dollars investment.

Things You'll Need

  • Money to invest in penny stocks
  • Account with an online broker

Step 1

Choose an online broker and open a trading account. Visit online brokerage websites and determine their terms and conditions, transaction fees and withdrawal options. Set up an account with the online stockbroker of your choice.

Step 2

Fund your trading account. A majority of online brokers allow you to fund your account through bank-to-bank money transfers, personal checks and money orders.

Step 3

Research penny stocks. Read online newsletters, forums and bulletin boards to discover what other investors are saying about specific penny stocks. Ask your online broker for recommendations.

Step 4

Purchase your penny stocks. Once you decide which penny stocks look promising, it's time to start investing. Simply enter the penny stock's trading number and type in the dollar amount you'd like to invest. Be sure to invest only a small amount in each penny stock and diversify among several stocks to reduce your chance of loss.

Step 5

Monitor your penny stocks. Keep an eye on the stock market and be prepared to sell quickly when your penny stocks see a significant jump or fall in price.

Tips & Warnings

  • Penny stocks should make up 10 percent or less of your total investment portfolio.
  • Because penny stocks are considered high-risk investments, only invest with money you can afford to loose.