What Are Penny Stocks

Penny Stocks is stock trading under 5.00, usually from companies that are new or trying to get on their feet. They offer these stocks for as low as 0.16 in some cases to lure investors in their companies. Penny Stocks can prove to beneficial with the right backers, and can even help some of these fledgling companies get their foot in the door to the major stock exchange, which in some cases become big name companies in their own right. The problem which rises commonly is to find these backers because little or no information is forthcoming about the companies and their practices or financial standings.

OTCBB- Over The Counter Bulletin Board, and pink slips play a large role in this, not wanting to be so forthcoming with the information because they do not demand such codes from them. This makes  research quite hard. Penny Stocks are also a way for the companies to use Market Capitalization rather then place stock prices on Penny transactions. The other thing with these stocks is the average person may take the risk and invest in these companies. Beginners can end up losing their money or even gaining if the company proves to be a hitter.

Penny Stocks are usually bided on when they are at their lowest and then held onto to see if any profit might be forthcoming in the future. Sometimes these investors have been known to hang onto these stocks for years at a time and can end up with a sizable profit as a result. This is the result of those who know exactly what they are doing in most cases; there have been a few when a beginner struck gold by pure luck as well. But as unpredictable as these stocks can be, they are needed for the smaller companies to survive on the market. Wal-Mart for instance started out not so much as a Penny stock, but in the 80’s they were selling their shares at 0.16, but their shares went for 50 dollars each. So even though they were never really a Penny Stock themselves, they did offer it to their employees. Penny Stocks can range from 23-33%, or even reach a higher margin of 50-100% depending on the value of the day and the company involved. While the Penny Stocks may seem a temptation for the beginner, but it is a double edged sword and should be approached carefully.

Research, software, and even a mentor is the best bet for those wanting to get into this line of trading. No mistake about it, money can be made, this has been proven, but only if one comes in well armed and ready to endure the ups and downs which come along with the trade. Risks are high, but benefits can be worth it, especially to those struggling companies who are depending on the investors to take the risk with them. The internet is a source of information to help those beginners, and mentors as well who are willing to offer free advice or a small fee to help. A serious beginner would be well advised to check into these sources.