For most investors, a simple buy-and-hold portfolio of index funds is the way to go. The easiest way to lose out on penny stock profits — aside from making bad trades — is paying unnecessarily high broker fees. Charles Schwab offers the most reasonable penny stock rates of any broker. Its online educational resources are second to none, and it offers commission-free ETFs to help you further grow your portfolio. I looked at all the hidden fees or surcharges that many brokers like to tack on to penny stock trades, and found the ones that had the absolute lowest rates available.
Best for Active Traders: Some trade for a little less than a dollar and some even trade for less than a penny at a fractional value per share. But regardless of specific price, any true penny stock is going to be an ultra low-priced investment on a per share basis.
In theory, you can buy 50, shares of a stock priced at 1 cent per share. But in practice, there are going to be costs to any transaction. It can add up big-time in lost profits. No Surcharges for Low-Priced Stocks: Some brokers charge a percentage on the total trade value and others charge a fee per share.
That means any broker that either charges you for large trades or insists you break them up into multiple orders is not conducive to penny stock investing. Penny stock investing is inherently aggressive, so some brokers demand you upgrade to a premium trading account with higher minimum balances or additional platform fees.
If you want to trade penny stocks, you should be able to do so without additional costs and headaches like these. Low Minimum Account Balance: There are no hidden fees per share, and no pesky maintenance fees to endure. This is a bit of a rarity when it comes to penny stocks. Many brokers charge you extra to invest in low-priced stocks, or to place large block orders. Take OptionsHouse, which I named as one of the best options brokers because of its super-low fees.
After changes to investing regulations in allowed brokers to be more flexible with fees, Schwab offered much lower fees than its peers and helped to create the discount broker marketplace that exists today by putting its customers first. Want to learn about, say, exchange traded funds? Then check out the tons of articles, videos, and on-demand courses in the Learning Center. There also may be a seminar available at a brick-and-mortar Charles Schwab branch near you, which you can attend free of charge as an account holder.
This is just one example of how having a big broker like Schwab on your side can open doors to new trading strategies as you learn and grow as an investor. For beginner and veteran investors alike, transparency matters. One thing to note: The potential for a volume discount coupled with a lack of additional penny stock fees is too powerful to ignore.
The most important thing for active traders, then, is to review their transaction history for a three month period and see if they perform more than trades or so. The vast majority of penny stocks operate under the radar of professional Wall Street analysts, which makes them incredibly hard to predict.
Consider that Apple Inc. And despite all this, there are still investors who have lost money on the stock by failing to anticipate the right time to buy and the right time to sell. Penny stocks have almost no media and analyst coverage. That makes them incredibly risky and uncertain. Remember these examples the next time you get a hot tip and think of just diving in without doing your own research.
At a minimum, you should always search the SEC Edgar database for filings from a potential investment. By law, any stock — even penny stocks — has to report its gross sales, net profit, and potential risks to investors. Otherwise, you could find yourself on the wrong side of one of these scams, with fraudsters making millions, and you losing all of your money.
Charles Schwab offers the lowest standard rates on penny stock trading, and has a transparent pricing structure that makes it the best option for just about everyone. Your email address will not be published. Just sign up to The Simple Dollar Daily and start saving today. However, the rankings and listings of our reviews, tools and all other content are based on objective analysis.
For more information and a complete list of our advertising partners, please check out our full Advertising Disclosure. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products are presented without warranty. Sign Up Now Best Overall. Cost Structure Trading fees: Up to 1 million shares per transaction without additional cost.
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