How to buy penny stocks in the UK 2025

As the adage goes, “look after the pennies and the pounds look after themselves”. Although you might not save your way to financial freedom by penny pinching, there is a possibility of making serious money by trading penny stocks.

However, these investments can be much more riskier and volatile compared to other shares because the companies are usually small, unestablished and fighting to make their name in the market. And yet, who doesn’t like an underdog?

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Cardiff Oncology (CRDF)		-11.62%	-89.73%	Ways to invest
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How can I invest in penny stocks in the UK

Here’s how to invest in penny stocks:

1. Choose a trading platform. If you’re a beginner, our table can help you choose.
2. Open your account. You’ll need to verify your identity when you sign up.
3. Fund your account. You’ll typically be able to deposit with a bank transfer or debit card.
4. Find the penny shares you want. Search the platform for the shares you want by name or ticker symbol and create an order to buy shares.

What platforms offer penny stocks in the UK?

Quite a few of the UK’s share dealing platforms offer penny stocks. If there are particular penny stocks you’re interested in, make sure that your chosen platform offers them before signing up.

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What are penny stocks?

“Penny stocks” is a loose term to mean cheap, low-priced shares of small, often newly-listed companies.

These aren’t hard and fast rules but typical characteristics of a penny stock include:

• Small company, market cap below £100 million or $300 million.
• Newer company recently listed
• Low share price (under £1 or $5)
• Limited financial track record
• Doesn’t pay dividends

Are penny stocks worth investing in?

You could consider investing in penny stocks if you’re looking for a cheap investment, and:

• 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 market volatility.
• You’re happy to take a bit of a “gamble”.

Advantages of investing in penny stocks

• Low cost of entry. Penny stocks are cheap, allowing investors to buy a large number of shares for a relatively small amount of money.
• High potential returns. If a small company grows significantly (perhaps the next Apple or Amazon) the returns could be substantial.
• Support for new companies. Investing in penny stocks can help emerging businesses raise funds they might not otherwise be able to access.
• Exciting opportunities for day traders. The volatility of penny stocks can offer short-term profit opportunities for experienced traders who understand the risks and timing involved.

Disadvantages of investing in penny stocks

• High risk and volatility. The same volatility that creates profit opportunities also means there’s a high chance of losing money, even with legitimate companies.
• High failure rate. Many penny stock companies struggle to survive or fail completely, leading to potential total loss of investment.
• Susceptibility to scams. The penny stock market can attract fraudsters or pump and dump schemes looking to exploit investors hoping for quick gains.
• Requires expertise and caution. Success in penny stock trading generally demands experience, research, and a cautious approach, it’s not a good fit for inexperienced investors.

Our expert says

"Penny stocks are very different from ordinary shares and need to be treated with a healthy dose of educated caution. Follow these tips to maximise your chances of success.

1. Do your research

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

2. Plan an investment 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. Also, decide what price you’d sell and cut your losses if the shares were to fall. Stick to your investment strategy guns if this does happen. The same applies to gains.

3. 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 stock 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 create a strategy, so you leave the emotions out of it.

4. Don’t get sucked in by “cheap” prices

Penny stocks may appear cheap compared to other shares listed on the LSE but don’t base your investment decision purely on this. The share price itself doesn’t really tell you whether the stock is “cheap” or not because that’s more to do with the valuation."

George Sweeney, DipFA

Deputy editor

Pros and cons of penny stocks

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

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Bottom line

Penny stocks, with their low cost and high potential returns, can add a dash of excitement to your investment portfolio. They carry significant risk, though. The possibility of losing your entire investment isn’t just theoretical, it’s a very real risk. It’s essential that penny stocks don’t make up the majority of your portfolio. Diversification is key, and it’s crucial to only invest money you’re fully prepared to lose.

Frequently asked questions

• What is the best penny stock?

  Sorry, peeps, that’s one we can’t answer. Not only do we lack a crystal ball to see which penny stocks will turn into future Apples, but if we tried to make recommendations, we’d be dangerously close to giving financial advice (and that’s something only regulated professionals can do). So, we reckon the best penny stock for you is a purely personal choice and should be based on careful research and analysis, combined perhaps with a little bit of personal preference or admiration for a particular underdog.

• Can you trade penny stocks in the UK?

  Yes, you can buy and sell penny stocks in the UK. Typically, they’ll be listed on the AIM market – a sub-market of the London Stock Exchange where small and medium-sized growth companies find their home. The main market of the London Stock Exchange is typically reserved for larger, better-established companies.

• Can you make money on penny stocks?

  It’s possible, but you’d have to either know exactly what you’re doing or get extremely lucky. If you see a small company that looks like it’ll soar and you like what it’s doing, you can invest with the hope that it will. If it does soar, then you can make a big profit, if not, you won’t.

• How much do you need to start investing in penny stocks?

  Penny stocks are typically worth less than £1 (or thereabouts) in the UK or less than $5 in the US. So, if you only buy a single share, technically, you only need to spend this much.

  You’re unlikely to strike it rich on this basis, though, even if the company is wildly successful. Plus, you’d need to choose a share dealing platform that permits a low minimum investment level. There are plenty that have a minimum investment of £10 or less.

• Are penny stocks regulated?

  Stocks themselves aren’t regulated per se. Instead, the UK’s Financial Conduct Authority (FCA) regulates financial services markets, including exchanges, brokers and share dealing platforms and investment platforms and brokers.

  However, it is fair to say that penny stocks traded on the AIM market have fewer restrictions than stocks traded on the Main Market of the London Stock Exchange.

  To be listed on the Main Market, a company:

  • Must have existed for at least 3 years
  • Must have a market cap of at least £30,000,000
  • Must have enough working capital for at least one year of trading
  • Must be willing to float at least 10% of its share capital.

  AIM stocks don’t have any of these requirements. This is one of the factors that makes them inherently risky.

• Why are penny stocks cheaper than blue-chip stocks?

  In comparison with penny stocks, blue-chip stocks are large listed companies that have been around for a long time and have a solid financial track record.

  While penny stocks, in most cases, pay no dividends, blue-chip stocks almost always do. Because they are (comparatively) stable and lower-risk, blue-chip stocks are typically in higher demand and can afford to levy a premium.

  Penny stocks, on the other hand, are more likely to be in tiny companies you’ve never heard of. They need to offer competitive rates to persuade you to take a punt on them.

• Are penny stocks more volatile than other stocks?

  Typically, yes. The types of companies that use penny stocks are usually newer, smaller companies with limited resources and little track record of delivering. While the potential for growth of such companies is high, the potential for failure is also high.

  So the value of penny stocks may shoot up…or it may crash through the floor. This may not be a linear pattern either. It’s likely that internal and external factors will affect the performance of a penny stock company more than a larger company with more contingency built in.

  In short, buyers of penny stocks need to be prepared for the risk that they may lose everything on their investment.

• Can penny stocks become regular stocks?

  It’s possible, yes. Some of the world’s biggest companies – such as Apple – once traded as a penny stock. If you’d got in on the act in Apple’s early days, you’d be pretty chuffed with yourself now.

  But for every huge success, many more penny stocks fail completely. So there’s no guarantee that the penny stocks you invest in will become regular stocks – or even continue to exist at all.

• What are the alternatives to penny stocks?

  If you’re tempted by penny stocks primarily because of their low price, then it might be worth considering alternative cheap investments. After all, if a stock ends up worth nothing, then you’ve still lost 100% of your initial investment, regardless of how cheap it was to start with.

  If you’re keen to invest in the stock market but don’t have enough money to buy many full shares in big companies, there are a couple of lower-cost alternatives:

  • Fractional shares. When you buy shares in a company, you buy a little slice of it. A fractional share is a slice of a slice of company pie. The original slice was the “share”, but if you cut that slice in half, you have 2 fractional shares instead. Technically, there’s no limit to how many splits you can make. An increasing number of share dealing platforms offer fractional shares as a way to give investors with lower funds access to stocks they wouldn’t be able to afford otherwise.
  • Index funds or ETFs. These 2 types of funds work slightly differently in how they’re traded. But both types of funds track stock market indices – such as the FTSE 100. By investing in one of these funds, you’ll get exposure to all of the companies in the underlying index in one fell swoop.

• Are there specific sectors where penny stocks typically perform better than others?

  Penny stocks aren’t sector-specific, but they’re common in volatile fields like biotech or mining, which have higher potential for huge but uncertain returns. Remember, high potential doesn’t guarantee success. It’s essential to evaluate each company individually.

• Does the UK have penny stocks?

  Yep. They’re stocks typically valued at less than £1 and usually traded on the AIM submarket of the London Stock Exchange.

• How high can a penny stock go?

  The highest that a penny stock can go and officially remain a penny stock is around £1 in the UK or $5 in the US. That doesn’t mean the stock can’t exceed this. In fact, there’s no limit on how high a stock that originated as a penny stock can go. Shares in some of the world’s most successful companies once traded for less than US$5, including Apple and Amazon. It’s just that once they grow well beyond the £1 or US$5 mark, they’re no longer technically penny stocks.

• What are the risks of trading penny stocks?

  The most obvious risk is losing all your money due to the high-volatility, high-risk nature of penny stocks. It’s also important to watch out for penny stock scams. For example, fraudsters may try to sell penny stocks in companies that they claim to be legitimate but don’t actually exist at all. Scam penny stocks are often promoted by text or email and are often not listed on legitimate stock exchanges.

• Are penny stocks worth the gamble?

  Only you can make that call. The key thing is to build an investment strategy to help you meet your goals. If penny stocks support that strategy as part of a balanced investment portfolio, and you go in with eyes wide open to the risks, you may decide it’s worth the gamble for the potential of stellar rewards. If not, then steer clear.

• How long do you have to hold penny stocks?

  There isn’t a specific rule on this. Day traders might hold penny stocks for just a few minutes. Longer-term investors may hold them for months or even years. It all depends on your investment strategy and the cut-off points for buying and selling you decided on in advance.

• What is a pump and dump in the context of penny stocks?

  “Pump and dump” refers to a scam where fraudsters boost a penny stock’s price through misleading hype, then “dump” their shares at the peak, causing a price crash. Avoid this by researching thoroughly, ignoring unsolicited advice, and being skeptical of “too good to be true” promises.

• What are the common indicators to look out for when analysing penny stocks?

  Analysing penny stocks involves thoroughly examining the company’s financial health, competitive position, and leadership. Standard metrics (like price-to-earnings ratios) often fall short as these firms can be laden with debt and not yet profitable. Watch for red flags like limited information, sudden promotions, or erratic trading. Diversifying your portfolio can help mitigate potential losses.

• Are there specific sectors where penny stocks typically perform better than others?

  Penny stocks aren’t sector-specific, but they’re common in volatile fields like biotech or mining, which have higher potential for huge but uncertain returns. Remember, high potential doesn’t guarantee success. It’s essential to evaluate each company individually.

• What should I look out for when speculating on mining penny stocks?

  Legendary investor Rick Rule, president and CEO of Sprott US Holdings Inc., advises paying close attention to a company’s past performance. In an interview, he said he reviews at least 5 years of financial documents to see if the company has achieved its stated goals and to examine how funds were allocated.

  Rule’s team once studied 25 randomly selected mining companies and found that 65% of raised capital was spent on general and administrative expenses, leaving only 35% for actual mining (in the ground). This lack of investment may explain poor performance.

  Always scrutinise a company’s track record and compare it to industry standards before investing. Don’t be afraid to dig deep!

To make sure you get accurate and helpful information, this guide has been reviewed by Mark Tovey, a member of Finder's Editorial Review Board.

Written by

George Sweeney, DipFA

Deputy editor

George is a deputy editor at Finder. He has previously written for The Motley Fool UK, Nasdaq, Freetrade, Investing in the Web, MoneyMagpie, Online Mortgage Advisor, Wealth, and Compare Forex Brokers. He's focused on making personal finance and investing engaging for everyone. To do this he draws from previous work and his Level 4 Diploma for Financial Advisers (DipFA), sharing what he’s learnt. When he’s not geeking out about money, you’ll find him playing sports and staying active. See full bio

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