What are Penny Stocks

Penny stocks are low-priced shares of companies. They are also common shares, but mostly of start up companies or companies which has not come up with a successful product.  Some of them consider it as very risky to trade penny stocks, because of irregular trading pattern.   Legitimate information on penny stock companies can be difficult to find and a stock can be easily manipulated. At times it becomes hard to sell penny stocks and hence considered as risky.

Penny stocks are not traded in the mainstream stock markets (NYSE, NASDAQ, or AMEX). They have a market caps at $500 million. But when things go well with penny stocks, investors can buy them cheaply and profit from them quickly.  There is lot  of scam involved with penny stock, some of them just make a living by issuing a IPO of penny stock company, just be aware of such scam masters.

Education and research of any company is integral in making wise investment decisions.  While financial, managerial and operational information for penny stocks listed on the OTCBB or major exchanges are readily available directly through the SEC, pink sheet listed companies are risky investments since they fall outside SEC regulatory filings, making solid information hard to find.

Having said above investing in penny stocks is always risky, you invest only as much as you can afford to loose.   You need to be lucky to reap the high margin of penny stocks.    Must do lots of  research on the stock you are going to buy and should have a clear entry and exit plan.  Always take a well informed and educated decision.