The stock market crashed in 2020 due to the pandemic and many companies’ share prices fell to historic lows. The best time for a shopping spree would have been at the crash, but there are many opportunities still available.
Purchasing shares at low prices is a good bet but most new traders tend to focus on the price too much. While low prices tend to attract buyers, all such companies are not financially sound and the risk factor is higher. This guide will list our top ten picks of the best shares under $5 to buy.
Where Can I Buy Shares Under $5?
In recent years, reduced fees and initial deposits have made online brokers the most cost-effective solution to buy and sell equities online. It is the most convenient method to trade shares. Brokers are usually an all-in-one package for DIY investing as they provide the security, support, and tools to help you manage your investments efficiently.
However, it can be difficult to find the best brokers, especially for new traders, as there are many options available nowadays. To help you narrow down your choices, we have selected some of the best brokers based on fees, regulatory status, and unique features.
Overview of the Companies under $5
Companies with stock prices below $5 are colloquially known as "penny stocks", despite that categorisation being seemingly inexact. Stocks with that label don't have the best reputation among investors. But not all stocks trading under $5 are from bound-to-fail companies. Some of them operate great businesses but are just undervalued by the market, and your role as an investor is to find those bargains.
What Are the Trading Hours For Shares Under $5?
Stocks under $5 are traded on regular market hours, and timings vary across global exchanges. If the stock is listed on the US exchange, it will most likely follow the 9:30 A.M. to 4 P.M. (ET) weekday schedule. Depending on certain brokers, pre-market and after-hours trading is also available. Pre-market trading hours generally run from 4:00 A.M. to 9:30 P.M. (ET), and after-hours trading is from 4:00 P.M. to 8:00 P.M. (ET).
How to Trade and Invest in Shares under $5?
Open a Trading Account
Before you invest in penny stocks, you'd first need a brokerage account or investment account so that you can buy/sell not only the companies you want but also various financial assets. You will need to provide your full name, address and email to open an account. You will also need to complete the KYC procedure by providing proof of identity and proof of residence.
The next step is to select the shares of companies under $5 in which you wish to invest. Compare the companies with their peers and check the historical price before making your decision. It is important to carry out technical and fundamental analyses before selecting a company. Diversification is also important to reduce the risk.
Place Your Trade
After getting your account approved, the last step is to fund your account and invest or trade your chosen stocks. Monitor the share regularly so you can easily adjust your position. You may also set up a stop-loss or take-profit order to manage risk and protect your capital.
Top 10 under $5 Shares to Buy
- Yamana Gold
- Xiaomi Corp
- Motus GI Holdings
- Nokia Corporation
- Geron Corporation
- Sundial Growers
- Telefónica, S.A.
- OrganiGram Holdings
- Limelight Networks
1. Yamana Gold
Yamana Gold is a Canadian precious metal producer. It explores gold and silver, with land positions throughout the Americas, including Canada, Brazil, Chile, and Argentina.
In 2020, it generated $1.5 billion in revenue and a net income of $203 million. Right now, the investment potential of this gold stock has more to do with its dividend yield than the prospects of it coming back to its old prices.
Yamana Gold has also increased its dividend in the last two years with an average of 53% each year. The stock trades at $4.81 at the time of writing.
2. Xiaomi Corp
Xiaomi Corp is a Chinese electronics company involved in various products, including laptops, fitness bands, consumer electronics, mobile apps, home appliances, and other products. It is perhaps best known for its smartphone business that spans many countries.
The company's recent reports show strong sales figures in 2019 at $205 billion. It was also profitable in the same year, clearing $10 billion in net income. The company's stock, which trades in the OTC market, had a solid 2020 with 200% gain.
3. Motus GI Holdings
Motus GI Holdings is a Florida-based medical technology company that focuses on providing endoscopy solutions and enhancing colonoscopy's cost-efficiency in the US and Israel. Its NASDAQ-listed microcap stock decreased from its $10.66 high in July 2018. It trades at only $1.73 at the time of writing. Despite this, analysts have a consensus buy rating for the company.
4. Nokia Corporation
Nokia Corporation is still attached to its once-dominant run as a cellphone maker in the 1990s and early 2000s. However, its pivot to the 5G industry is what makes it an exciting buy, especially in 2021 and beyond.
The Finnish company reported a $2.4 billion net loss in 2020 after it churned out a tiny profit ($7 million) the year before. But its current 5G projects lineup and deals are what keeps investors optimistic. In January, the company's stock price jumped to a high of $9.79 before returning below $5 at $4.17.
5. Geron Corporation
Geron Corporation is a biotechnology company based in California. It specialises in developing therapeutic products for hematologic myeloid malignancies.
Back in December, the company announced the opening of the IMpact OF phase 3 clinical trial in refractory myelofibrosis. Its stock price has been in an uptrend since the start of the year, gaining nearly 20%. Geron trades at $1.92 at the time of writing.
Expert Tip on Investing In Shares Under $5“ Most stocks that trade for less than $5 will often have low trading volumes, which could pose liquidity problems. This means that it could be difficult for you to exit your position if buyers are not readily available. Even if you do, the exit price might not be the one you prefer. As a general rule, you should only trade such stocks with a trading volume of at least 100,000 shares a day. This ensures that there are sufficient buyers when you wish to exit your position. ”- Ron Mendoza
Why Invest in Shares under $5?
Trading stocks under $5 is one of the ways to generate possibly above-average returns. The low price of each share can multiply immensely if the market catches on and realises the business's value and real potential.
Some stocks trading under $5 levels also offer consistent dividends. As a result, even if they don't take off as much as you'd like, they can nonetheless provide you with a steady income stream.
Still, what you have to understand is that, at this price point, most companies just come and go, and those with once-great businesses stuck at this depressed level find that it's an uphill battle to get back to their former glory. New traders must use a risk management investment strategy while trading these cheap stocks.
Frequently Asked Questions
News is available on social media channels such as Twitter and Facebook. Many expert traders also offer advice regarding investments. Users can also add the share to a portfolio and news tracking app that provides updates related to the share.
Yes. Most countries consider profits from trading as a taxable event. Check your local tax regulations before trading.
Yes. Most regulated platforms will insist on KYC norms before allowing you to trade. This is to provide a safe and a secure environment for the users.
A regulated platform often insists on KYC and publicly displays its regulatory status online. A list of some reputed platforms is also provided in the guide above.
The most common strategy to reduce risk and protect invested capital is by using a stop-loss order. There are many other strategies for reducing risk while trading, including diversification. Make sure you only make information-based trading decisions by conducting sound analysis before placing your order.
No. However, some brokers offer pre-and post-market hours trading.