Investing in penny stocks is a very simple process—if you understand what you’re doing. In this post, I’ll walk you through how I invest in penny stocks, the steps involved, what penny stocks really are, why people invest in them, how safe they are, and finally, my honest advice if you’re thinking of investing in penny stocks yourself.
Let’s get started.
How I Invest in Penny Stocks in 2026 (Step by Step)
When I want to invest in penny stocks, I follow a very simple process:
- I identify the penny stock I want to invest in
The first thing I do is choose the penny stock that interests me after some research. - I deposit capital into my brokerage account
I fund my brokerage account—this could be platforms like Bamboo, Afrinvest, or any other broker I use. - I buy the stock
Once the money reflects, I go ahead and buy the stock. - I sell at a higher price or hold for bigger gains
I either sell when the price is high or hold the stock if I believe it still has much higher potential.
That’s basically the entire process. However, before investing in any penny stock, you should be sure you fully understand what penny stocks are and the risks involved.
What Are Penny Stocks?
Penny stocks are stocks that trade at very low prices.
In simple terms, penny stocks are:
- Stocks trading at fractions of a dollar (like $0.01, $0.02, $0.05)
- Or stocks trading at ₦5 or below per share in the Nigerian market
Any stock selling at fractions of a dollar or below ₦5 per share is generally considered a penny stock.
Must Read: 5 U.S Stock in 2026 you must have on Watch-list.
Why Do People Invest in Penny Stocks?
From my experience and observation, people invest in penny stocks for a few major reasons.
1. Penny Stocks Are Cheap
One major reason I see people invest in penny stocks is because they are cheap and affordable.
For example, with just ₦5,000, I can buy over 1,000 units of a penny stock. But if I wanted to invest that same ₦5,000 in popular stocks like Amazon, Alibaba, Meta (Facebook), I wouldn’t even be able to buy one full share—I’d only get tiny fractions.
This makes penny stocks attractive to beginners and small investors.
2. Penny Stocks Are Highly Volatile
Another reason people invest in penny stocks is because of volatility.
Big, well-established stocks usually grow slowly:
- 15% per year
- 30% per year
- Sometimes 100% in a very good year
But penny stocks are different.
From what I’ve seen:
- A penny stock can rise 1,000% in a single day
- In a year, some have grown by thousands or even millions of percent
Of course, this also means they can crash just as fast. This extreme volatility is why many traders are attracted to penny stocks.
3. The “What If” Mentality
Let’s be honest—another reason people invest in penny stocks is hope.
Many investors feel like:
“What if this stock takes off someday?”
It’s similar to gambling. People invest small amounts hoping that one day the stock explodes and turns them into millionaires or billionaires.
Must Read: 3 Nigerian Stocks to Consider Investing in 2026
How Safe Is It to Invest in Penny Stocks?
I’ll be very honest here.
Penny stocks are extremely risky.
Yes, the stock price may be ₦1 or ₦5, but that doesn’t mean the risk is small. You’re not investing ₦5—you’re usually investing ₦5,000, ₦50,000, or even ₦1,000,000.
Because the prices are cheap, many investors:
- Overinvest
- Put too much money into one stock
- Believe the stock must rise someday
I’ve personally seen penny stocks perform extremely well—some moved from a few kobo to thousands of naira, and some even reached hundreds of dollars. But I’ve also seen many crash to zero.
Must Read: How to Become a Stock Investor in 2026. (And What It Really Means)
My Personal Advice on Investing in Penny Stocks
If you’re planning to invest in penny stocks, here’s my honest advice:
- Only invest money you can afford to lose
If losing that money will affect your life, don’t invest it. Penny stocks are not safe investments. - Do your own research
I always look at:- Company fundamentals
- News and announcements
- Market sentiment
- Trading volume
- Don’t put all your money in one penny stock
Diversify. Penny stocks can wipe out your capital very fast. - Control your emotions
Greed and fear destroy penny stock investors more than anything else.
Now You Know
Penny stocks can make you a lot of money—but they can also make you lose everything just as fast. That’s why I treat them as high-risk investments, not guaranteed opportunities.
If you’re disciplined, patient, and well-informed, penny stocks can be part of your investment journey. But if you’re careless, they can be very unforgiving.
Invest wisely.
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