Written by daniel | Posted in Investing |

In my experience with investing, I’ve found the best penny stocks to purchase are those entities which have a business model that is easy to understand.

Typically, penny stocks do not lend themselves to detailed financial analysis because everything is kept under wraps, forcing an investor to act on rumors or price action. An investor who has access to inside info on the stock or has a relationship with a well informed employee will gain a tremendous edge over the speculator who is flying completely blind. The Security Exchange Commission does not put the same amount of energy into monitoring penny stocks as it puts into the blue chip issues on the big board. The accounting standards for these penny stocks are not as stringent as they are for the major stock exchanges.

Assuming that you are not one of the fortunate investors that have inside information on a penny stock, your best bet is to purchase issues whose performance trends are not correlated in any meaningful way. Select penny stocks from unrelated business sectors and chart their recent price activity to determine if they tend to move in lockstep with each other. By investing in penny stocks whose price movements are generally independent of each other, you give yourself some added safety, because it is less likely that a major crisis would cripple both issues. That is the beauty of holding a varied portfolio.

If you cannot find a comfort level in the penny stock market, then your next option is to look for an investment expert. Be sure that you do not consult a broker who is pushing specific stocks, because he is not likely to be looking out for your best interests.

Consider first investing some time into learning about penny stock investing; sites like buypennystocksguide.com are good place to start. Seek out penny stock publications that put out specific advice about stocks or business sectors. The publishers are seasoned investors with a tremendous amount of accumulated experience in the financial markets. While it is true that these newsletters are not risking their own capital with their stock picks, investors tend to stop purchasing their advice if it is not proven to be accurate over time, so make sure you review their historical performance record.

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