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First of all, a penny stock is a stock that is priced between 1 cent and 5 and is traded over the Pink Sheets or the OTC Bulletin Board. These stocks may also trade on foreign and other securities exchanges. However, when trading penny stocks, there are penny stock rules that must be followed that are different from the trading of stocks on the major exchanges.

The Securities and Exchange Commission (SEC) has set forth penny stock rules when trading and these rules are:

The SEC requires the brokerage firm to obtain a written agreement from the customer regarding the transaction and the customer must be approved to complete the transaction.

The firm is required by the SEC to provide the customer with a document that outlines the risks of penny stock investing.

The rules state that the consumer must be notified if there is a market quotation and what the market quotation is for the penny stocks the investor wishes to buy.

The firm must also disclose to the customer what their commission will be for the trade.

Penny stock rules also state that the firm must provide the customer with monthly statements that discloses the market value of each penny stock.

These penny stock rules are necessary to ensure proper trading of penny stocks and that the investor is aware of all risks associated with it. The SEC carefully outlines the penny stock rules that brokers must follow in order for the investor to have the best experience possible trading penny stocks by making the investor aware of all risks associated with penny stocks as to not cause them to get in over their head.

In the penny stock rules, there is a Customer Protection Rule (Rule 15c3-3) that states the control all of the money that is paid by the investor is on the hands of the broker. The broker must periodically figure up how much money is being held that belongs to the customer or has been obtained from securities owned by the customer. If the broker determines that there is more money on hand than what is owed to the customer or from the customer to the broker, the money must be placed within a reserve bank account. This money is placed within the bank account for the sole benefit of the customers. This rule is very important because it prevents the brokerage from using funds that belong to customers to fund their own business.

Penny stock rules are designed to protect the customer, the stock market, and the broker. If a broker breaks any of these rules set forth by the SEC, then the broker can be subject to SEC investigations that can result in serious trouble for the brokerage firm. That is why it is important for the investor to be aware of the penny stock rules and make sure the broker is following all rules accordingly so that the investments of the investor are not compromised in any way.

Investing can be confusing, especially for the beginner. Getting some basic tips can help a beginning investor to make informed choices that fit their needs. Each person has a different goal when investing and that plays a big impact on how you invest. The following list explains some things beginners should know before investing.

1. Understand that there are no set rules for investing. There are no guarantees and no perfect way to invest.

2. Make informed choices. Before investing in any way you should completely understand how your investment will work and all of the details of the transaction.

3. Make a simple plan to determine your goals and needs. This will help you to determine what investments to make and how much money to invest.

These three tips are great for general investing, but many people are looking to invest in the fast paced world of the stock market. The above tips are a good beginning, but the following tips will further help those interested in investing in stocks.

1. Look at the value of the stock instead of the price. Low cost stocks may be low for a reason. Look at the whole picture. See why the price is low and if there is a possibility it may rise.

2. Check the companies return on net worth. This is the profit after taxes divided by the net worth. It is important to see a trend of growing return on net worth.

3. Spread out your risk. You should not put all your money in high risk stocks. Try some lower risks and some higher risks. This is the best way to protect your money.

4. Understand the basics of stock prices. Prices move up or down depending on future projections.

These four tips can help a beginning investor start investing in the stock market.

No matter what type of investment you are looking into, knowledge will be the key to success. These short tip lists are just the beginning to understanding investing and how to maximize your return. Keep learning and trying.

Many first time investors think that they should invest all of their savings. This isnt necessarily true. To determine how much money you should invest, you must first determine how much you actually can afford to invest, and what your financial goals are.

First, lets take a look at how much money you can currently afford to invest. Do you have savings that you can use? If so, great! However, you dont want to cut yourself short when you tie your money up in an investment. What were your savings originally for?

It is important to keep three to six months of living expenses in a readily accessible savings account dont invest that money! Dont invest any money that you may need to lay your hands on in a hurry in the future.

So, begin by determining how much of your savings should remain in your savings account, and how much can be used for investments. Unless you have funds from another source, such as an inheritance that youve recently received, this will probably be all that you currently have to invest.

Next, determine how much you can add to your investments in the future. If you are employed, you will continue to receive an income, and you can plan to use a portion of that income to build your investment portfolio over time. Speak with a qualified financial planner to set up a budget and determine how much of your future income you will be able to invest.

With the help of a financial planner, you can be sure that you are not investing more than you should or less than you should in order to reach your investment goals.

For many types of investments, a certain initial investment amount will be required. Hopefully, youve done your research, and you have found an investment that will prove to be sound. If this is the case, you probably already know what the required initial investment is.

If the money that you have available for investments does not meet the required initial investment, you may have to look at other investments. Never borrow money to invest, and never use money that you have not set aside for investing!

Each individual has a risk tolerance that should not be ignored. Any good stock broker or financial planner knows this, and they should make the effort to help you determine what your risk tolerance is. Then, they should work with you to find investments that do not exceed your risk tolerance.

Determining ones risk tolerance involves several different things. First, you need to know how much money you have to invest, and what your investment and financial goals are.

For instance, if you plan to retire in ten years, and youve not saved a single penny towards that end, you need to have a high risk tolerance because you will need to do some aggressive risky investing in order to reach your financial goal.

On the other side of the coin, if you are in your early twenties and you want to start investing for your retirement, your risk tolerance will be low. You can afford to watch your money grow slowly over time.

Realize of course, that your need for a high risk tolerance or your need for a low risk tolerance really has no bearing on how you feel about risk. Again, there is a lot in determining your tolerance.

For instance, if you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do?

Would you sell out or would you let your money ride? If you have a low tolerance for risk, you would want to sell out if you have a high tolerance, you would let your money ride and see what happens. This is not based on what your financial goals are. This tolerance is based on how you feel about your money!

Again, a good financial planner or stock broker should help you determine the level of risk that you are comfortable with, and help you choose your investments accordingly.

Your risk tolerance should be based on what your financial goals are and how you feel about the possibility of losing your money. Its all tied in together.