4 Tips for Boosting Your Income With Penny Stocks
If you’re looking to make extra income alongside your full-time job, investing in penny stocks could be a great way to do so. Many professionals have had great success trading penny stocks part-time. To truly be profitable, however, you have to make smart trading decisions. To get started, here are four ways you can boost your income with penny stocks.
Do Your Research
Most penny stocks are in newly established, small, or under-the-radar companies. If you set upon the right one, you can make significant gains. It’s crucial, however, that you choose the right companies to invest in. This requires doing your research before investing.
Look for companies that are financially strong and stable. Ideally, you want to invest in ones with little to no debt. Have they recently reported earnings and exceeded expectations? Do they have a new game-changing product in the pipeline? Have they announced any exciting partnerships or acquisitions? Are they supported by a strong management team? These are all positive signs to look for when researching penny stocks.
Time Your Trading Appropriately
As a part-time trader, you can only afford to set aside a few hours of the day to trade. This timing should be deliberate; don’t just invest when you feel like it or have a few minutes on your lunch break. Your best chance of getting good returns in a short period is around the stock market’s open and close: 9:30 a.m. and 4:30 p.m. Eastern time.
Consider dedicating an hour or two each morning to researching and buying penny stocks. Begin before trading opens so you’re well-prepared right at 9:30. Then wrap up your trading by 10 or 10:30; at this point, the market’s volatility typically begins to wane. It ramps back up right at trading’s close, so you might also set aside time to invest around 3:30 p.m. All told, you should only be buying penny stocks for one to three hours a day.
Diversify Your Portfolio
Because penny stocks have a high risk-to-reward ratio, your safest bet is to diversify your investments. Put your money into a variety of industries rather than all in one basket. Look for a handful of strong or growing sectors of the economy. Exactly how many penny stocks you own is up to you, just be sure you’re not overloading yourself. A part-time trader probably isn’t going to be able to manage 100 stocks, for instance.
Your best chance at consistently making money on penny stocks is if you trade regularly. You’re less likely to be successful (and are missing out on more chances to earn money) if you just play around with penny stocks every now and then. Rather, set aside a couple of hours for trading every workday to hasten your learning curve. Develop a routine and a strategy that you’re comfortable with.
Making smart investment decisions and using your time wisely will give you the best shot at making money trading penny stocks part-time.