Penny stocks are exciting and rewarding investments. It stands for shares that trade from a fraction of a penny to $5. Although they are riskier than average investments, they have great reward potential. Indeed, some penny stocks have gone from 25 cents to $20.00, while others have become worthless.

Penny stocks suggest those companies with shares trading less than $5 each. There are several ways to learn about this business and that is through stock message boards, stock newsletters and stock blogs. It has the ability to turn a small investment into a fortune.

The average penny stock is a very small company with highly illiquid and approximate shares. In general the company also require limited listing along with fewer filing and regulatory standards. Many investors like penny stocks as it does not take a big cash outlay to get started, and you can own a piece of a good company inexpensively.

The Securities & Exchange Commission (SEC) defines penny stock as any stock under $5. On the other hand, some investors use the standard at $3 and some even consider it at $1. These companies are quoted on the "pink sheets" system, otherwise recognized as OTC trading.

Penny stocks possibly will trade irregular. For instance, it may be difficult to sell penny stock shares once you own them. Because it may be difficult to find references for certain penny stocks, they may be unattainable to accurately price. Investors should be ready for the possibility of lose.

Penny stocks are admired by many investors there is possibility of making great money in a short period. If you purchase 10,000 shares of a stock trading at $.10 and the stock doubles overnight, you've doubled your money! Also, sometimes these penny stocks "grow up" to be traded as mid-cap stocks, multiplying in value many times over.

In the United States, a penny stock is a common stock that trades for less than two cents a share and is traded over the counter (OTC) through quotation services such as the OTC Bulletin Board or the Pink Sheets. Broker-dealers who subscribe to the system can use the OTCBB to look up prices, information or enter quotes for OTC securities. Pink Sheets is an electronic quotation system to display quotes from broker-dealers for many over-the-counter securities.

Penny stock business can lead to risk if it is not undertaken with proper research. In most cases, the company is paying people to promote their stock. They mislead you as to the prospects and potential of the company.

Penny Stocks should not be bought being persuaded by free newsletters, the rumor mill, e-mail spam, chat rooms, promotional web sites, and fax services. In each case, the publisher either has a vested interest in the shares, or is getting paid by the company to produce misinformation.

Penny stocks represent trading below $5. The positive point of this trade is the ability to turn a small investment into a fortune while on the downside it can bring risk, volatility of the shares, and the lack of corporate transparency.

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