The allure of penny stock picks is their cheapness per share – less than a dollar. This can be a terrific way for starter investors to begin without much capital, and perhaps more importantly allow people to learn the ways of the stock market without losing a fortune. But the inexpensive and easy investing strategy has its pitfalls like any other method of making money that is as competitive as it is advantageous. Making sure you remain the predator and avoid being the prey will not only guarantee minimal losses and increase the chance of gains, but also embolden further efforts on your part to make serious moves in the investment world.

1. Diversify: That's the Point
This is a rule as true with millions as it is with pennies. Don't commit the number one foul of amateur investing by buying up thousands of dollars worth of penny stocks in one enterprise. The cheapness of the penny stock market encourages spreading your capital around. Don't count on becoming the next Warren Buffet by putting all your available capital in a struggling start-up based on good will. If your investment fails, you'll have little left to motivate further investment action.

2. Expect Storms. Take Calm Seas as Time to Prepare for Storms!
If the last several years have proven anything, it's that instability is the default setting for investment opportunities. This is ever more the case for the wily nature of inexpensive investments, which are typically cheaper because the fates involved are as unknown as they are unpredictable. Don't go into penny stocks with any expectation other than for a struggle. It's not that there aren't rewards in penny stocks, they're just harder to fight for.

3. Hearsay is Nothing
There is little value in amateur analysis of penny stocks. Don't ever base your decisions on what other penny stock investors are buzzing about. Oftentimes this is in fact part of intentional over inflation of value on the part of those offering the stocks. Many of these enterprises put out false press releases and other expressions of hype with the intention of these things making their way onto forums and other Internet posts. Fact checked thoroughly any tips you find (including these)

4. Stay on Regulated Playing Fields
This is obvious but since penny stock investors are typically greenhorns it's worth mentioning that only exchanges that are regulated by the Securities and Exchange Commission should be utilized for your ventures if you're using American currency. Options off these exchanges run the risk of being highly manipulated.

Penny stocks are a great way to learn the ropes and potentially make a few bucks on the way. Just watch out for those whose investment is often in the gullibility and inexperience of others.