Buying Penny Stocks A fortune for a penny

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					Buying Penny Stocks A fortune for a penny


When it comes to investing some consider buying penny stocks. There are tons of outlets available on the
web for you to purchase these stocks at.There are also a few other terms that are used to describe the term
penny stocks, (such as micro cap stocks). Usually stocks under five dollars are considered to be called penny
stocks. Let's just keep things simple by saying that all you will need to know starting out is that buying this
type of stocks (or micro cap stocks) are a whole lot more risky than regular stocks. Simple as that! So for
those of you still interested in buying stocks at this point, or for those of you who don't mind being a little
risky, the rest of this article will discuss exactly why buying penny stocks is so risky.


Risk Factor 1


First of all whenever you desire to invest your money into something, the first thing you want to do is
exactly what you are doing right now. Research. Yes, you want to be well informed, and have a full
understanding as to what your are about to invest your money into. Well, when it comes to investing in
penny stocks, and researching doing so, information is admittedly much more difficult to find. The reason
that information on buying penny stocks is so much more difficult to find is because of the fact that the
companies holding these stocks are not required to report to the SEC and are therefore not examined as
closely as stocks that you would see represented on the Nasdaq (or the New York Stock Exchange). So
when it comes to purchasing penny stocks, most of the information you will find won't even be from a
creditable source. Can you see why this would be a tad risky?


Risk Factor 2


Attempting to buy penny stock is like applying for a new job. If you have ever looked at the requirements
for a new job, and seen that they have a set of minimum requirements that the applicant must meet to even
be considered, then you can understand that this is the way for a company to make sure that it weeds out the
applicants that it surely wouldn't be interested in. Well think of penny stocks as the job applicant that was
weeded out. Harsh you say? Perhaps it is especially when you consider that just because a person doesn't
have all the qualification listed, doesn't mean they aren't fit for the job. But once more, this is exactly why
buying penny stocks is a risky investment. You have to make sure you choose the right one(s). You see
restrictions when it comes to remaining on the exchange that are used as a measure to determine whether the
stock is worthy or not aren't required to be held by penny stocks. Yes, if you don't mind living a risky life, or
even if you have normally been successful when it comes to taking risks, then this type of investment may
be perfect for you!


Risk Factor 3


The next reason investing this way is considered to be risky is because of their lack of history. When you
meet someone new, one of the things you desire to know about them is their history. When you apply for a
job, one of the things the employer wants to know about you is your history. When it comes to this type of
stocks, they really don't have a huge amount of history as they are normally new companies, or either
companies that may be on their way to bankruptcy. Now once more, you have to turn on your inner risky
side when it comes to examining these companies, because who is to say that that new company on the
penny stock list isn't the next Wal-mart! Additionally, who is to say that just because the company is
approaching bankruptcy means they are not going to pull out of it. So when it comes to buying penny stocks
you must consider all factors when making your decision.


Risk Factor 4


The final risk factor when it comes to buying penny stocks is the ability to resell them when you are ready,
which is better known as liquidity. You want to make sure that you can resell these stocks when the time is
right. If you pick the wrong ones it will obviously be hard to do this. Be aware that some companies may
even advertise their stocks to make them appear to be the next best stock, when it may simply be a final
attempt for them to sell! And at times, these stocks may also be sold to off shore accounts, who then turn
right back around and sell them back to the US, making it appear as if it's a new lead, when it is certainly
not. When it comes to penny stocks, if you research the history of the company, you will be able to make an
informed decision.


Additional factors to consider
Additionally be aware that although some companies such as Wal-Mart may appear that they were once
penny stocks, that they actually were not, as the -adjusted stock price-, that you may see is just that.
Adjusted, or split, after the prices which started high continually rose and needed to be split. And don't be
fooled into thinking that just because you can buy a whole lot of penny stocks that you will make a quick
dollar if the stock rises. If this happens, you WILL make a quick dollar, but also you could LOSE money if
the stock drops the other direction. All of these are important factors to consider when it comes to buying
penny stocks.


Conclusion


The conclusion of the matter is that penny stock should not be considered as complete and total loss, as
every company must begin somewhere, and just because they are on the stocks list doesn't mean they aren't
going to be much more valuable this time next year. Buying this type of stocks may indeed be one of the
best investments you have made, you simply have to make sure that your research on the company has been
completed, and that you made an informed decision.


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