One simple statistic should convince you though that investing in penny stocks carries great risk: It is estimated that 70 percent of all investors lose money on penny stocks. Successful penny stock investing requires knowledge, hard work, and skill.

Diversify your Portfolio
Less than 10 percent of your portfolio should consist of penny stocks, otherwise you are putting yourself at too much risk. However, you also need to diversify within your portfolio of penny stocks, don’t put all your eggs into one basket, rather choose a large number of companies. You only need a few companies to be successful to make up for the inevitable, many failures.

Find a Specialist Broker
Finding a broker specializing in penny stock investing will save you a lot of headache. Most penny stocks are not traded on the stock exchanges, but over-the-counter. If you do not have a broker specializing in them, the simple act of buying them can prove difficult.

Choose the Right Companies
A specialist broker or, alternatively, an online service can provide you with a prospectus of companies with penny stocks. Carefully read, consider, and double check all information on the companies. You need to ask yourself what exactly will make the companies you choose a success. Be realistic and do not let yourself be swayed by unrealistic promises and glossy sales materials.

In the end, all your hard work should result in a sensible, diverse portfolio. Don’t put your hard earned money at unnecessary risk. Remember, slow and steady wins the race. Penny stock investing can be fascinating, fun, and it can certainly pay off, but only if you do it right.  Check out the buy penny stocks guide to learn some of the basics of penny stock investing.  Trust me; there is no fun in losing all your money.

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