Buying penny stocks is not usually the greatest idea. After all, most penny stocks are that low for a reason and that is usually that the company has fallen on hard times. However, that doesn’t mean there aren’t some good stocks out there every now and then. Additionally, some people just gravitate toward buying penny stocks online because they like the idea of buying a stock that doesn’t have to do up much to give you a big return.
What defines a penny stock is up for opinion: some people consider penny stocks as stocks under $1.00 where as others put the number at $5.00. Anyway, any stock that is under one dollar is definitely a ‘penny stock’ and some online brokers add on a surcharge for every trade.
In most instances the penny stock surcharge is 1 cent per share of every stock traded with many online brokers. Now 1 cent doesn’t seem a lot but chances are that you are buying thousands of shares at a time and it can add up. For instance, if the penny stock you are buying costs $.50 (50 cents), you might be buying 5000 or even 10,000 shares for a total investment of $2,500 or $5,000.
If you buy that many shares, your total charges will be whatever the broker charges per trade (usually under $10.00) plus an additional $50 or $100! That makes a simple trade a very expensive one just for the priviledge of being able to make a trade of a penny stock. Some brokerages only tack on the penny stock surcharge on all stocks over a certain number such as 2000 shares but as you can see, in both of my examples you would be paying significantly more than you would for a “normal” trade.
One of the online stock brokers with zero penny stocks surcharges is ChoiceTrade.com. You get all stock trades for the low price of $5.00 and there are no added charges for trading penny stocks. Barron’s magazine has given ChoiceTrade a 4 start rating in each of the last 5 years and so you can sign up knowing that they are a reputable and established online broker.
In addition to the low trade rates with Choice Trade, you also have access to a mobile trading application (an extra $3.00 per trade applies) so that you can make stock trades right from your Blackberry, Winsows mobile, and soon to your Iphone and Ipod Touch. This is not for everyone as most people online know how to buy stocks online from their computers but if you are one of those advanced techies, this mobile trading application might be for you.
The $5.00 per stock trade is on the low side of most online brokers and the no surcharges for penny stocks is what anyone who want to trade them needs. In this day and age, there is no reason to be paying those surcharges when you have brokers who don’t have them.