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Australia’s penny stocks

Which penny stocks are listed on the ASX and should you invest?

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The term penny stocks is more commonly used overseas in the US, UK or Europe, but you could have also heard the phrase in Australia too. So what are they?

Penny stocks is a loose name for cheap, low-priced shares of small, often newly listed companies. There are a few different ways to define Australia's penny stocks. Some definitions say it's listed companies with a market cap of less than $50 million, which is why in Australia penny stocks are also commonly referred to as small-cap stocks. Another definition is stocks with a share price of less than $5. However this is a rather vague definition as some blue chip stocks have share prices below $5, too.

Investors are often attracted to penny stocks for their cheap prices and potential growth opportunities, though there are risks involved with penny stocks, too.

What are penny stocks?

Some of the typical characteristics of a penny stock include:

    • Small company
    • Market cap below $50 million
    • Newer company recently listed
    • Share price below $5
    • Limited financial track record
    • Doesn't pay dividends

List of ASX penny stocks

Source: These are the 20 stocks in the iShares S&P/ASX Small Ordinaries ETF with the smallest market caps. This list includes some examples of Australian penny stocks and is not an exhaustive list, nor is it a recommendation for any of the stocks mentioned.

Pros and cons of penny stocks

Here are some of the benefits and risks of investing in small-cap Australian penny stocks:

Pros

  • Low prices. Because they're low priced, investors can hold a diversified portfolio of penny stock companies without needing to spend as much as they typically would.
  • Growth opportunity. Small-cap, newly listed companies can often present great growth opportunities if you pick the right ones. However it could be a bumpy ride to the top.
  • Thrilling. Penny stocks often see their share prices change significantly in little time, which can be exciting and thrilling for investors with a high risk tolerance.
  • Day trading. Because of their large price swings, penny stocks are often used by active day traders.

Cons

  • High risk. Penny stocks are very high-risk investments compared to other listed companies and ETFs with a longer financial track record. Not all companies that list on an exchange do well and a lot of penny stocks never become anything more than a penny stock.
  • Very volatile. Penny stocks often experience extreme share price highs and lows within a matter of days (or even within the same day).
  • No income. Penny stocks rarely pay any dividends, as all revenue is usually reinvested back into the company to help it grow.

Penny stocks versus blue chip stocks

On the opposite side of the scale to penny stocks are blue chip stocks. In comparison to penny stocks, blue chip stocks are large listed companies that have been around for a long time and have a long, stable financial track record. Some of Australia's biggest and most well-known companies are considered blue chip stocks, such as the Big Four banks, Telstra, Woolworths and BHP.

While penny stocks in most cases pay no dividends, blue chips stocks almost always do.

Should you invest in penny stocks?

You could consider investing in penny stocks if:

  • You have a high risk tolerance
  • You're an experienced investor
  • You're willing to cut your losses if the share price falls significantly
  • You have a long investment time frame and are willing to ride out the volatility
  • You're happy to take a bit of a "gamble"

Tips for investors considering buying penny stocks

If you're keen to invest in Australian penny stocks, here are some tips to help you get started:

Do your research

This is important for all investments, but particularly higher-risk investments like penny stocks. Blue chip stocks are, by their nature, lower-risk options as they've got a long history of strong financial performance.

Plan a strategy and stick to it

Before you start buying, decide which penny stocks you're going to invest in and how much you're going to invest in each one. It's also important to decide what price you'd sell at if the shares were to fall and stick to it to avoid the "I'll just hold a little longer and see if the price jumps back up" mentality. The same applies for gains.

Don't make emotional decisions

It can be easy to get emotionally attached to a penny stock, as they're often the underdogs in your portfolio. So when their share price falls and falls some more, you can find yourself making excuses as to why you should keep holding. This is why it's important to make a strategy, so you leave the emotions out of it.

Don't get sucked in by the "cheap" prices

Penny stocks may appear to be cheap in comparison to other shares listed on the ASX, but don't base your investment decision purely on this. One factor that influences a company's share price is the demand for its shares. The less demand from investors, the lower the share price. So some penny stocks may appear to be cheap, but you need to ask yourself why this is.

How to buy penny stocks in Australia

  1. Choose a share trading platform. If you're a beginner, our table below can help you choose.
  2. Open your account. You'll need your ID, bank details and tax file number (TFN).
  3. Confirm your payment details. You'll need to fund your account with a bank transfer, debit card or credit card.
  4. Find the shares you want to buy. Search the platform and buy your shares. It's that simple.

Compare share trading platforms to buy penny stocks

Data indicated here is updated regularly
Name Product Standard brokerage fee Inactivity fee Markets International
IG Share Trading
Finder Award
IG Share Trading
AUD 8
AUD 50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares, Forex, CFDs, Margin trading
Yes
Brokerage discount: $5 on Australian shares for active traders & $0 commission on US and global shares
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, forex and CFDs, plus get access to 24-hour customer support.
eToro Share Trading (US stocks)
USD 0
USD 10 per month if there’s been no login for 12 months
Forex, CFDs, US shares
Yes
Zero brokerage share trading on US stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and forex from the one account.
Superhero share trading
AUD 5
No
ASX shares
No
Trade ASX stocks and ETFs with a flat $5 brokerage fee and a low minimum investment of just $100.
CMC Markets Stockbroking
AUD 11
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, mFunds
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, managed funds, forex, commodities and cryptocurrencies, plus access up to 15 major global and Australian stock exchanges.
ThinkMarkets Share Trading
AUD 8
No
ASX shares, ETFs
No
Fast sign-up: Start trading in just a few minutes
Switch between your ASX share trading account and your forex account on your mobile and access some of the lowest brokerage fees on the market with a flat $8 commission (until $200,000).
ANZ Share Investing
AUD 19.95
No
ASX shares, Global shares, Margin trading, Options trading
Yes
Earn 1 Qantas Point per AU$3 spent on brokerage fees on certain instruments.
Access Morningstar reports, company announcements and and live pricing via ANZ’s share investing platform. Available for desktop and mobile.
Westpac Online Investing Account
AUD 19.95
AUD 63.50 per year on the global markets account
ASX shares, Global shares, Options trading, US shares
Yes
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Compare up to 4 providers

Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares.

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