Risks, Benefits and Tips on Buying Penny Stocks
According to the Securities & Exchange Commission (SEC), any stock under $5 is a penny stock. However, some investors set the bar at $3 and some even go down as far as $1 to consider it a penny stock. These companies are quoted on the "pink sheets" system, otherwise known as OTC trading.
Risks involved in buying penny stocks:
1. Some of these companies are not required to file with the SEC.
2. Lack of information or history about a company. For many investors, they want to invest in companies that have some kind of track record or can prove that they will make money. However, with penny stocks, you're usually dealing with companies that are fairly new or on the brink of bankruptcy.
3. You may not be able to find a buyer if you decide to sell.
4. The chance to lose alot of money - especially if you've invested quite a bit of money in a particular stock. But then again, you could lose money with just about any stock!
The big benefits in buying penny stocks:
Many investors are attracted to penny stocks because of the opportunity to make mucho dinero in such a short amount of time! If you buy 10,000 shares of a stock trading at $.10 and the stock doubles overnight, you've doubled your money! Also, sometimes these penny stocks "grow up" to be traded as mid-cap stocks, multiplying in value many times over.
To help eliminate the risk in buying penny stocks, follow these tips:
1. Beware of those spam emails that I mentioned earlier - especially if they "guarantee" a return on your money. Most of the time these emails come from promoters who own a large chunk of shares. They create hype and drive up the price of the stock, then sell them and go onto the next project leaving the company and other investors high and dry.
2. Avoid those stocks that go up and down, unless you're an experienced day trader that knows just the right time to sell.
3. Don't fall prey to company hype that are always promising big returns with no information as to how they will go about providing those returns.
4. Do your due diligence on a company before throwing down that hard-earned cash for their stock.
Published by Maria Palma
Maria Palma is a professional writer and visual artist based in San Diego, California. View profile
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- Any stock under $5 is a penny stock
- There are high risks involved with buying penny stocks
- Penny stocks are for the experienced investor
8 Comments
Post a CommentIt was a awe-inspiring post and it has a significant meaning and thanks for sharing the information.Would love to read your next post too......
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Stock Tips
It was a awe-inspiring post and it has a significant meaning and thanks for sharing the information.Would love to read your next post too......
Thanks
Regards
Stock Tips
SRCO.OB seems to touch its new 52 high week price considering their strong financial performance as well as their coming conference in the next week.
SRCO.OB :- Anthony Havens, Sparta's CEO, stated, "The significant increase in online consumer credit applications that Sparta is receiving through this aggregator partner validates our investment over the last three years in the development of our iPLUS® credit decisioning software.
BeaconEquity.com has come out with a report on IBOT.PK, where the analyst writes, “… based on our understanding of IBOT's business model and our discussions with management, we believe the Company has a good chance of becoming a rising star in the U.S. biofuel market.
Can any expert person tell me what are the key drivers for the growth of Sugarcane ethanol. And if any one tells me how is IBOT.PK considering its business in the same industry.
Although there is a considerable amount of risk involved in penny stocks, there are also many benefits we can get from investing there. Penny stocks are not bad like a lot of people think. They have a great potential to make good money for you. All you have to do is collecting as much information as possible in order to arm yourself against any fraud may occur in penny stocks.
Always remember that there is no investing in this world without risk.
Creative
http://pennystockslive.com/
I had never heard of penny stocks before now, seems risky.