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What are Penny Stocks

Why Invest in Penny Stocks?

You can start small with penny stocks. If you don’t have a lot of cash to buy stocks that are $30.00-$70.00 a share, penny stocks offer you the opportunity to buy stocks for sub pennies or pennies on the dollar. There is enormous gain potential with the right penny stocks. It’s not very often you can find a stock that goes from $30.00 to $120.00, in a short time. But with penny stocks you have a better chance to see stocks go from $0.30 to $1.20 which represents gains of 300%!!

What are Penny Stocks?

Penny stocks are any stocks that trade under $5.00. The term “penny stock” (also called microcap or small cap stock) is most commonly used for the stocks priced at under a dollar a share. You will find companies such as Microsoft (Nasdaq: MSFT) and Wal Mart (NYSE: WMT) were once penny stocks. The savvy investor must look upon penny stock investing as a challenge to find “the next big thing.”

What is the difference between penny stocks and other kinds of stocks?

If blue chip stocks – companies that have been around forever such as IBM, General Motors, and McDonalds – are considered the filet mignon of the stock market, penny stocks fall more in the ground round section of the meat department. Not the best cut of meat, but sometimes you can really pull something tasty out of your hat with enough preparation and attention.

Where do I go to buy a penny stock?

Most penny stocks trade in the “over-the-counter” market (OTC), and are quoted on the OTC systems such as the OTC Bulletin Board (OTCBB) or the Pink Sheets instead of with the NASDAQ or New York Stock Exchange. Before buying even one share, be sure to check out the company’s financials. If the company is registered with the SEC, you will find their financial statements on the SEC’s website. If a company is not registered with the SEC, check with your state securities regulator before investing.

How do I get started in investing?

All investing starts with the same thing: careful consideration and study. Check out books from the library on the subject, take classes, do some research online, read financial magazines or newspapers do some kind of preparation to make sure you understand what you are getting into before you write any checks or transfer any funds. Please do your due diligence and consult with a financial professional.

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