Created by: pink partner
Everything you should know about investing in penny stocks.
If you are newbie on the stock market you are advised to invest in penny
stocks. Why this is so? I will try to explain this in the next few paragraphs. Penny
stocks are the stocks which has very low value. You can find penny stocks on the
market for value less than one dollar. These stocks are also highly speculative
stocks issued by companies with small equity.
You can not find these penny stocks on the stock exchanges like NYSE,
NASDAQ and other. Usually these penny stocks are sold “over the counter” and
they are not traded on regular base. The stocks issued by some company are
penny stocks when its value is low (under 5 USD) or when the market
capitalization is low (this means when the nominal price of the stocks multiplied
with the number of stocks in sale is lower than 50 million dollars).
If you are beginner in stock market investing you are advised to start with
buying such stocks. This is so because of its small value. In other words you are
learning the basics of stock market investment by buying cheap stocks. In this
way you will learn how to find information about the company, how to asses the
future fluctuation of value of the stock and how to avoid the risk. If you lose you
will loose only small amount of money invested in these penny stocks.
Penny stocks are also highly speculative. The risk incorporated in them is
higher than the risk when buying ordinary stocks in the stock exchange. But, you
should never forget the fact that higher risk means higher profit. So, when you
are investing in penny stocks you are risking your invested money in order to
make huge profit. If you have assessed well the future price of the penny stock
you will generate higher income than when investing in stocks with lower risk.
If you are interested in buying penny stocks there are so called “pink
listings”. You can take a closer look at these listing of all penny stocks that are
offered for sale and theirs price. You can find out the time and the place on which
these will be sold. Penny stocks are not sold on the regular base and this may be
a problem for you. If we assume that you have bought a penny stock and after
the market value is increased you may experience problems to sell it. This may
mean that you made a profit but you have lack of liquidity because at the moment
there is not any interested buyer.
When investing in penny stocks you may need a help of the broker. Brokers
are obliged by SEC to give you monthly report about the value of your purchased
penny stock. By doing this you are lowering the risk by investing in penny stocks.
You can consult him about every question you wish to know. He is obliged to
respond upon your questions.
When investing in penny never put all your money on the penny stock from
one company. Not doing this you are exposed on the risk to lose large amount of
your investment. In order to avoid the risk you are advised to invest in penny
stocks of more companies. In this way you may lose some profit but you also
lower the risk of losing your money.