The definition of penny stocks, also known as micro-capitalization ranges. A stock is termed as a penny stock based on market capitalization and share price. According to the Commission U.S. Securities and Exchange Commission (SEC), a stock is termed as penny stock if its share price is below $ 5. However, many in the investment community believe that a penny stock is one with the stock price of $ 1 or less. As junk bonds are compared to investment grade bonds in the fixed income market, penny stocks listed in penny stock exchange are compared with blue chip stocks on the stock markets. Trade penny stocks online are riskier and more speculative than trading in stocks mid cap or large-cap blue-chip or another. Many investors believe how to trade penny stock is like gambling, we must be prepared to lose money. Trade penny stocks online may also be more expensive. Penny stocks are generally traded in the penny stock exchange over-the-counter or the pink sheets. If you intend to invest in penny stocks, you need to know How To Buy Penny Stocks Online and the differences between penny stocks and other stocks, such as blue chips and mid caps. Although stock returns mid-cap and large-cap is driven primarily by fundamentals, many analysts believe that the performance of penny stocks is driven primarily by investor speculation.
Many blue chip stocks were once penny stocks.
If you analyze the fundamentals of 100 penny stocks, maybe only two or three would generate higher returns. Despite the problems associated with penny stocks, many investors intend to invest in penny stocks because they believe many blue-chip stocks today, were once penny stocks. However, stock prices of these companies are almost never trading for pennies, but it seems that way when you look at the price adjusted for stock splits. Many investors ignore this fact. For many penny stocks are traded on the pink sheets and are not monitored by the SEC, you will find it difficult to find credible information about them. Penny stocks often lack liquidity, which means that investors would find it difficult to buy or sell. A lack of liquidity often helps fraudulent investors to manipulate stock prices. The SEC itself in Schedule 15G states “Investors in penny stock should be ready for the possibility they may lose their entire investment.” A penny stock traded on the OTC market is more likely to be delisted by disrespect. If the particular company is not able to list its shares on another exchange or become re-established, you may lose 100% of your investment. You should consider this issue seriously, if you intend to take long positions in a penny stock. Many new investors are attracted to penny stocks, given their low price and potential gains. There have been cases where penny stocks rose over 1000% in a few days in the past, but this is extremely rare and often the price is not supported. There is historical evidence that most penny stocks lose all value.