Stock investing consist of comparing current penny stocks prices with their intrinsic value, buying stocks trading at a price that is less than their intrinsic value and selling overvalued stocks. It's obvious that the investor has to settle on the intrinsic value of stocks.

I think some cheap stocks, typically those around the $1 value or even less than $5 are considered penny stocks. However, in this day and age where many good companies have been decimated due to the credit crunch you could conceivably find "cheap stocks" of companies that are undergoing a turnaround which could be deceptively be seen as penny stocks. In these, you could see some substantial gains. I owned of these for a while, BEE, from $1.19 to $4+ when I sold it. But I kept it for over a year and made some thorough research to make sure it was a good bet. At the time, my assessment was that the stock fair value was $4.50.

take all the stocks youre considering, write the name on a piece of paper, put them in a hat and pick one.

or do some serious research of the companies youre considering investing in

For any penny stocks investor, it is essential to understand stock market basics. So it is advised to do your research. Gain deep knowledge on these stocks and also get informed about current market trends.

Penny stocks are basically traded on the Pink Street and OTC market for being a high risk in investment. In fact, these stocks can swallow all the investment and at the same time can give huge profits in one night.

If you have never invested and have very little money than maybe you should be saving in the bank first...save and build your money up, and than consider investing...which is legal gambling and I emphasize the word gambling.

Penny stocks for you would be financial suicide. Don't do it. More people lose by far than people that make money. Build your money first. When you feel you have some "extra" money that you can invest (gamble) than choose a mutual fund from Fidelity, Vanguard, or the American Funds.

In the interim start learning about investing from these mutual fund companies through their websites.

RichS CFP(r)
www.insimplelanguage.com