Select Page

Best Brokers for Penny Stocks

Best Brokers for Penny Stocks

This article is geared mostly to new traders because Penny Stocks is where most new traders first take the plunge. Penny Stocks are very high risk. However, it is also an investment option where you can make a lot of money in a short space of time if you are willing to take those bigger risks.

Advanced traders do invest in Penny Stocks, but they do not put all of their eggs into one basket. You can make a lot of money with Penny Stocks, but think of it both as a great way to enter the world of investing, and as a bonus-producing investing method rather than a staple of your investing strategy.

To be honest, I have dabbled in many ways to wealth-build over the years. When I first became interested in investing, I did start out with Penny Stocks and I still use them today. However, there are literally hundreds of ways to build wealth and you should spread your wings over time so you may use the payoff from one to fund another.

For Example

There is a company called Argos in the UK and they occasionally have 60% discounts on major mattress brands. I used to buy them at 60% discounts whenever the original price was over £1000. I would buy a mattress that was previously £1200 for just £480. Argos would then put the price back up to £1200, and I would list the mattress on eBay for £950. In the advert, I would direct people to the Argos listing with the £1200 price tag to prove my offer was a great deal and allow them to haggle me down to just under £800. I made a profit on every occasion bar one when my new girlfriend decided to lovingly unwrap my new mattress, drag it upstairs and put in on my bed with fresh new sheets. I would have been a little cross with her, but her plan also included a good hard mattress testing session, so it wasn’t a complete loss (nudge, nudge, wink, wink).

My Thoughts – Again

I have changed my wealth building methods over time and will probably change again and again as I get older. At the moment, I invest in stocks, and I only concentrate on Penny Stocks when I have enough time to do my research and have fun with it. Penny Stocks investing is fun!

I do not and will not invest in real estate unless I can do it without a mortgage, and I only invest in industrial plots. The housing market scares the piss out of me because there is still a massive housing bubble that people are continuing to ignore.

I am currently a big fan of saving with Peer-to-Peer lending companies and I still put a lot of my money into US and UK bonds because I figure they will never go bankrupt (erm, maybe it is time to lower the 20 trillion of debt that the US has…I hope somebody does make America great again).

See What Your Own Bank Offers

If you are considering penny stocks, then try your own bank first. They may offer a fair deal for stock selling and buying. They are probably going to have larger trading fees than an online stockbroker does, but it is more convenient, and it may put you in a better standing with your bank so that they offer you better financial deals in the future.

You may be worried about their higher trading fees, but you have to remember that you are buying penny stocks. They are high-risk investments that are going to fail, but if they suddenly do very well, you can make a very lot of money in a relatively short space of time.

For Example

Let’s say you buy 200,000 shares at 0.3 cents per share. That will cost you $600 with a buying fee of $25 and a selling fee of $25. Let’s also say that the share price increases from 0.3 cents per share to 0.6 cents per share in ten months. That means your shares are now worth $1200.

Take away the amount you spent, which is $600 plus $25 to buy and $25 to sell, which comes to $650. Take that off your $1200, and you are left with $550 profit. Suddenly, the $50 buying/selling fee doesn’t matter so much.

My Thoughts

I have loved the idea of wealth building since I read the book, “The millionaire next door.” Through my teens I had it all wrong, I thought that wealth building meant earning more, but I was sorely mistaken. That book taught me that the money you save is your wealth.

With that in mind, I was (and still am) a big fan of penny stocks. I loved the idea of setting aside a small sum of money and still being able to buy thousands of shares in a company.

I used to use HSBC invest direct because I could save up money in my current account and throw it at a new company with very cheap share prices. I did it very infrequently, but I could do it whenever I wanted. The only reason I moved away from HSBC is because they started charging an annual fee for using their Invest Direct system, and I invest money in penny stocks so infrequently that it wasn’t worth my while sticking with them.


[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][+] Trading fees do not matter so much when you are buying penny stocks

[+] Using your bank may improve your standing with your bank

[+] Using your own bank is often more convenient

[+] Banks are typically safer and more secure than online brokers

[+] Your bank may offer a wider range of offshore investments

Best Brokers For Beginners

With the advice about fees not mattering still ringing in your ears, consider brokers that have functions, tools and education centers specifically for beginners. If you are trading with penny stocks, you are probably not investing a lot of money. If that is the case, or if you are using penny stocks investing as a way of learning the business, then choose a broker that treats beginners well. Try our article on brokers for beginners to see four suitable brokers.

For Example

Let’s say you save up just $300. You are probably going to have to invest and leave the money in the new/high-risk company for a long time. With that in mind, it may be worth finding a company that is doing well, but growing very slowly. A broker that is beginner-friendly may help you find one. It may also help you understand its tools and functions so that you may monitor companies for a while before you invest.

My Thoughts

Not all beginner-friendly brokers have high fees, but some of them do. Nevertheless, higher fees don’t matter that much to newer investors. If you are new to investing, or if you are nervous investor, a virtual market function may be just what you need.

Sadly, I started investing long before I discovered what virtual markets are. They are sections of a broker’s website that has most/all of the functions the website has, but it allows you to invest “pretend” money into businesses. You invest the virtual money and watch over time to see if your investment would have paid off.

I used to watch smaller companies to the point where it became a bit of an addiction. The first thing I did in a morning was switch on my computer to see how different companies’ share prices had opened. I used to note down the codes for each company and check up on them. I would kick myself if one shot up quickly, and I would calculate how much money I would have right now if I had taken a chance on the company I was watching. I wish I had known about virtual markets because it would have saved me a lot of time in the morning.


[+] Try our article on the best brokers for beginners

[+] Remember that fees still do not matter when Penny Stocks trading

[+] Do not invest a lot of money into penny stocks if you are a novice

[+] Accept the fact that you will probably lose your money

[+] Dabble with virtual market functions and get a little practice first

What About Brokers With Free Trading Offers?

There are some brokers that offer free trading, but as with most things, there is a catch. Without counting one-off promotions, and/or account-opening promotions, we have compiled a list of companies that offer freebies in the article Best Brokers for Free Trading. The article is written for amateurs and new investors, but it is still a little more esoteric than usual.

Is there a catch? What is the catch? Usually, the catch is that you are limited to which companies you can invest in or how many free trades you are allowed. Another catch is that the free trades are simply a way of getting you to sign up and use their brokerage. Our article shows you some decent freebies, but the most attractive freebies seem to come from companies that are either new or struggling.

For Example

It is up to you if you wish to search out companies that offer free trades, but you should ask yourself some searching questions. The company may offer free stock purchase trades for company XXY because they are paid a commission from company XXY. They may be paid a commission for a number of good or bad reasons, but consider if whether it is in your interest to invest. Ask yourself why company XXY may be paying broker referral fees to the broker.

My Thoughts

Shouldn’t Penny Stocks traders consider freebies before considering paid trades? This question bothers me to this day. The pragmatic/logical side of me says, “I can pay a $20 fee, or pay no fee and buy 5000 more shares.” However, in my experience (take this on board or not), the freebie investments usually have a catch that I don’t like, such as having to sign up with the company and pay a maintenance fee, or they offer freebie trades on unattractive stocks.

If you are thinking about dabbling in the world of Penny Stocks, I suppose I would advise that you find a good promotional offer to save a little money wherever you can. If the company is a good one, if it is well established and trusted, then even the offer of 10 free trades may be worth you signing up.

If I just met my clone and he had never bought or sold penny stocks, would I advise him to use a company that offers freebies? Maybe…


[+] Do a little research into how “Brokers referral fees” work

[+] Look online for negative reviews about the freebie company

[+] Read our article on Best Brokers for Free Trading

[+] Are people on forums talking about a company’s freebie catch?

[+] Do you know other people that have used the freebie company?

[+] Read the terms and conditions before signing up

[+] Why is this broker willing to take a loss for you?

[+] Only trade what you can lose without losing sleep over the loss

Capital One Investing

Their website doesn’t assume you know a great deal about stock trading, and the basic user interface if very novice-friendly. They have banking services, which adds a layer of convenience that many online brokers cannot. The education center is very good, and they explain taxes, which is something very few other brokers do. The automatic investing tools may be handy if you are an intermediate trader, and the app allows you to customize the interface to suit your needs.

For Example

If you sign up with Capital One, there is no account maintenance fee (subscription fee), and there is no minimum balance requirement or opening deposit. If you are only dabbling with the idea of Penny Stocks investing, then it gives you room to breath. You can sign up without any pressure to invest, and their education center allows you to learn at your own pace.

My Thoughts

RED FLAG, RED FLAG!!! If you are a seasoned trader, your red flag alarm should have gone off the second you read “Capital One Investing.” Websites are paid commissions/referral fees by brokers to promote their brokerage services. Usually the most highly reviewed companies are the ones that are paying the most referral money. There are comparison websites that artificially make one company look far superior and cheaper than the others when they are not, especially when the websites omit the companies that are actually cheaper than the ones they are promoting.

Be highly skeptical whenever you see websites promoting one company over another. In my defense, I have only mentioned one broker that I have used, and that was HSBC Invest Direct, and I said I don’t use it anymore because of the maintenance fees. Also, I have not affiliate linked to Capital One, and they don’t have an affiliate program anyway, so it would be tough (but not impossible) for me to make money by mentioning them here.

I think Capital One is very beginner-friendly, and ergo I think they are good for people wishing to invest in Penny Stocks.


[+] Their banking features are convenient

[+] No minimum balance requirements

[+] No opening deposit requirements

[+] No maintenance or subscription fees

[+] Learn at your own pace

[+] A simple interface for newbie traders

[+] Good prices, even if they are not the lowest

[+] The app is better than average

Fidelity Investments

They have relatively low prices, they allow you to trade on your desktop and via your mobile app, and they have banking features that are very convenient. They do not have inactivity fees, which means there are no subscription and/or minimum balance requirements. They also have a very good virtual trading function that is ideal for new starters, such as people wishing to invest in penny stocks. The only downside is that the company has a $2500 opening deposit.

This means that you have to put $2500 into your account in order to open it. You get the money back, which means you are not paying a fee, but you still have to place a lump sum of $2500 into your account before it is officially opened. If you are simply dabbling with the idea of investing, the high opening deposit may dissuade you from choosing Fidelity Investments. The truth is that if the company didn’t have such a high opening deposit, then it would outshine Capital One, even if Fidelity does have higher trading fees (which it does).

For Example

If you were to sign up with Fidelity, you could withdraw your opening deposit if you wish; which is tricky but possible, though you should ask an advisor and/or find it in the terms and conditions before depositing. Also, the opening deposit may be just the amount you wished to invest in penny stocks, and the virtual trading platform allows you to practice before you take the plunge.

My Thoughts

New traders, especially people that are simply sticking their toe in the water to test the temperature, are more likely to invest smaller amounts into Penny Stocks. While I do not wish to dissuade you from investing smaller amounts at first, it is often contrary to common sense. The fewer shares you buy, the longer you (typically) have to wait for the stock price to rise before selling for a profit. I think a high opening deposit helps to assure both the broker (and yourself) that you are serious about investing.

You do not have to spend all of the $2500 into just one company (as I understand the Fidelity terms and conditions). You can break it up into smaller amounts. Play around with their virtual market for a few weeks before you make your first purchase. Experiment with differing amounts of money and see if you would have made a loss or a profit during the weeks you were experimenting.

Split your money according to the risk you are taking. Designate $400 to the brand new company with 0.0125 share prices, and designate $1000 to a company with 0.95 share prices. Again, please experiment with the virtual trading platform they have to see how well you would have done if you had invested $400 instead of $4000.

When you are playing around with the virtual trading system, seek out very volatile stocks because their price changes almost daily. Firstly, playing with the volatile stocks is more exciting and fun, and secondly, seeing how it all works may help you make better decisions when you start playing with your own money.


[+] Feel free to be put off by the opening deposit because it is high

[+] There are no maintenance/subscription fees

[+] The trading fees are lower than average

[+] They offer banking functions too

[+] Use it on your PC, your Android or Apple device

[+] The virtual trading market is perfect for beginners

Conclusion – Are There Other Options?

There are always other options; you could have a person you trust make your first investments until you are confident enough to open your own account. Obviously, you have to trust this person to give you your money back when you want to sell and such. You could avoid the Internet all together and use a person-to-person or over-the-phone broker.

Take the time to learn about Penny Stock trading, and seek out websites that offer easy access to companies with a very low share price. Many times, your biggest problem is finding companies with low share prices and finding useful information about them. For example, you do not want to invest in a company that is quickly dying, and you may not wish to invest in a company that is selling tickets for visits to the moon that are dated 2045.

Finally, I hate to give out warnings on a subject like this because our readership is highly intelligent, which means such warnings are like telling a surgeon to wash his hands before operating. Still, there are literally thousands of scams online relating to Penny Stocks. Use your own selection method, not another persons. Remember that many websites are paid to promote stocks or brokers, and remember to actively seek out online criticisms and complaints about a company before you use it. If the company has a completely perfect online reputation, it may have a very aggressive online PR company, and if they have hundreds of complaints, you should probably steer clear too. Common sense and a non-greedy attitude is all that is needed to avoid scams.

Please consider reading:


About The Author

Ben Todd

Ben was a seriously broke graduate student with bad credit who after finding himself rejected for any sort of credit card or loan for most of his adult life, finally decided to get his financial life in order. ' He spent several years reading as many financial advice books and blogs as he could. And suprisingly, Ben found he actually LIKED the topic of personal finance; after fixing his own finances, starting his own successful work at home website business, and using his earnings to get out of debt, created to help others do likewise!

Leave a reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Popular Posts