Most people are familiar with the advice “buy low, sell high,” but far fewer are able to actually do it. Finding cheap stocks just before they begin a meteoric rise is a dream that doesn’t easily become a reality.
Successfully identifying these opportunities takes diligence, skill, and a lot of luck. However, it isn’t impossible. Here’s what you need to know if you’re looking for cheap stocks.
How To Find Cheap Stocks
The cheapest stocks are known as penny stocks. There’s some variance in how people define penny stocks, beyond simply the idea that they’re cheap stocks. Some define penny stocks as those selling for less than $5, while others have a lower threshold of $1. Some brokerages allow customers to search specifically for penny stocks. If your brokerage doesn’t offer this feature, you may have to use a third-party stock screener that allows you to sort stocks by price.
Of course, finding cheap stocks is one thing, and finding a good cheap stock with promising opportunities is another thing altogether. A cheap stock might be cheap for a reason — it just isn’t worth much. To find a promising cheap stock, you’ll have to use fundamental analysis of a company’s finances to try to find good stocks that the rest of the market hasn’t caught onto yet.
One basic example of this type of analysis is the price-to-earnings (P/E) ratio. By comparing the price of a stock to the company’s earnings, you can compare the relative value of two stocks. However, no single analysis formula will be enough to signal a promising stock. Before picking a stock, investors should analyze a company from several different angles, and then compare those measurements to others in the industry.
As you look for cheap stocks, keep in mind that many major brokerages have introduced fractional share trading. This means that you don’t need to pony up the cash needed to buy a whole share of stock; you can pitch in just a few dollars and split a share with other traders at the same brokerage. If one share of Google is selling for $1,000, for example, then you could put in a fractional share order for just $10 and get one-hundredth of a share in Google.
One final note: don’t forget to diversify your investments. Most experts recommend balancing stock investments with at least some bond investments. Stocks and bonds perform differently, so buying both stocks and bonds helps protect you from vulnerability in either market.
What If You Have Never Invested?
For those who have never invested before, terms like P/E, fractional shares, and stock screeners might be overwhelming. If that describes you, relax. Successfully picking penny stocks requires immense skill and hard work, but that’s not the only kind of investing. If you’re a beginner or want a hands-off approach, get started with a managed investing service like MoneyLion’s Auto Investing.
Investing services from MoneyLion do the heavy lifting for you. Instead of choosing individual stocks, you simply choose how risky or safe you want to be with your investments in the pursuit of gains (usually higher risk delivers higher reward over time), and the service will do the rest.
The money you deposit into your MoneyLion Managed Investment account is automatically invested in products designed to meet your goals, and it’s periodically rebalanced to ensure that your money stays on the right path. You can also change your investment strategy anytime.
Choosing A Platform That Meets Your Needs
Whether you decide to pick penny stocks or automate your investing, it’s important to find a platform that feels like a good fit for you. The layout should feel intuitive, the fees should be reasonable, and the performance of the portfolio should make you money.
MoneyLion excels in all three areas. To pursue strong portfolio performance, MoneyLion’s Auto Investing service partners with Wilshire Associates, an investment firm with decades of success in the industry.
MoneyLion’s fees, like the fees with all of its products, are fair and simple to understand. No matter how much you invest, MoneyLion charges a simple $1 per month fee plus an additional $0.25 per withdrawal, should you make one. Keep in mind that ETF investment products will likely come with their own fees, but these are charged by the ETF managers, not by MoneyLion. And MoneyLion carefully chooses low-cost ETFs for its portfolios.
Perhaps best of all, MoneyLion products are incredibly convenient and intuitive. If you already have a RoarMoney account, then you already know how to easily access all your finances from the MoneyLion app.
When you add Auto Investing, you’ll be able to access it through the app in just the same way. You won’t need to spend hours looking up stock choices and tapping in complicated trade orders — just decide how much you want to deposit into your investment account every month, and MoneyLion will take care of the rest.
Start Growing Your Nest Egg Today
Signing up with MoneyLion’s Auto Invest is easy. If you have RoarMoney, then you’ve already done the app signup work. If you don’t have RoarMoney, it takes just minutes to set up a free MoneyLion account in the app and open a MoneyLion Investment account. MoneyLion will recommend an investment strategy based on your investing goals, and you can accept it or adjust it.
Once you’ve opened an investment account with MoneyLion, your next step is to set up auto deposits for your investment account. Tap on the Finances tab in the MoneyLion app, find the Auto Invest section, then designate how much you want to contribute, how often you want to contribute, and where you want those funds to come from (such as your RoarMoney account or linked external bank account). You can change, pause, or cancel your Auto Invest at any time.
You can also personalize your portfolio further while potentially boosting its earning power by adding thematic portfolios. Learn more about those here.