Don’t let their name fool you – penny stocks never cost a penny. According to the United States Securities and Exchange Commission, a penny stock, which is a small-cap stock, is deemed to be anything under $5. Despite financial specialists ignoring a connection between penny stocks and sub $5 stocks that are exchanged on large trades, it is important that you keep this in the back of your mind to prevent confusion.
Keep in mind that even though penny stocks are not regularly discussed on CNBC or Bloomberg, this does not mean that these stocks should be ignored. In light of recent years, penny stocks have earned a reputation for being a trap, however, this is not always the reality. As a speculator, penny stocks could be your most exhilarating ride yet.
Generally speaking, the question that comes up a lot with penny stocks is as followed: if penny stocks are not exchanged on normal trades, how does one go about purchasing them?
Where Do You Purchase Penny Stocks?
Penny stocks, similar to most available stocks, are able to be purchased through a stockbroker. If a stock is recorded on a trade such as NYSE and NASDAQ, they will not be labelled as a “penny stock”. However, they can be used to maintain the cost of a measure of penny stock profit, without worrying about risk. Considered to be more dependable, these trades have various posting prerequisites, and penny stocks tend to be exchanged on services such as Pink Sheets and OTCBB.
Penny stocks benefit from being exchanged on these services. For instance, Over-the-Counter Bulletin Board, or OTCBB, is a quotation and it posts necessities. In comparison to Pink Sheets, which is a quotation distributer, OTCBB is considered to have more authenticity.
Mentioned above, Pink Sheets is a quotation distributer which equips speculators with data on stocks. Since Pink Sheets isn’t associated with the U.S. Securities and Exchange Commission, these stocks tend to be quite risky.
Benefits of Penny Stocks:
Yet another question that comes when discussing penny stocks is, why would you put your cash in a penny stock if there is significant risk surrounding the market?
Anyone interested in finance and stocks knows that penny stocks are no stranger to fluctuation. Therefore, individuals keep hoping that luck will eventually be on their side and that their stock will jump from $0.08 to $8 in two weeks. Don’t believe that this can happen? Check out any discussion forum on the Internet surrounding stocks and you’re bound to find at least one example of an investor who made real money working with penny stocks.
It takes time for a company to switch from penny stock to power stock, however, the trick here is to learn which is the right stock to invest your time and money into. Despite numbers constantly changing in the world of penny stocks, investors have still been able to bring in excess of 1,000% within several weeks.
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