Since the 19th century, penny stocks have been part of the American investment world. This is where the stocks got their names, since modern penny stocks almost never cost a penny. They're usually more like ten cents to five dollars. Now, let's look at the risks of working with penny stocks, then the opportunities they can provide.
Penny stocks are share offerings made to investors by companies that are just too small or new to have a listing with the major stock exchanges. They have significant growth potential, and the initial investment can be quite small, but you run the risk of encountering a pump and dump scheme. Like anything else dealing in the OTC (over the counter) market, the buyer should beware.
Choosing penny stocks in a reasonable fashion means having the business model of the company selling them independently appraised. This is like buying shares in any other company that's being publicly traded. It's important to understand the company's business model, what they're doing, who's competing with them, what they make and what products are being offered.
One of the most appealing things about penny stocks is that the majority of businesses offering them are quite simply put together. One typical type is that of a mining company, which will only be profitable when the price of the material it mines reaches a certain level. There are also some oil exploration stocks which use this kind of valuation.
Penny stocks are rated as a high risk vehicle by the Securities and Exchange Commission. Some of the risks involved include incomplete or indirect reporting of finances, fraud, and limited liquidity. People playing using a day trading strategy, sudden demand on penny stocks can create wide ranging volatility, which also makes it hard to short sell them.
The financial reporting guidelines on penny stocks are actually pretty loose. Unlike the national exchanges, not much is required of companies that list this way - in fact, sometimes these stocks will just de list for a few days! In the investment type called Pink Sheets, penny stocks have nearly no regulatory requirements at all, including few to no minimum accounting standards or reporting guidelines.
Because these stocks aren't standardized and don't have an generally accepted requirements for accounting, they can be extremely vulnerable to being manipulated or even just plain fraud. People posing as independent observers can encourage people to run up the price, then they sell and de list the stock. This is the classic pump and dump scam.
Now, that doesn't mean you should be scared off of these stocks entirely. There are lots of real, legitimate start up companies, and they have to get going somewhere. Anyone who can pick a winner will get a handsome reward.
If you're someone who can spot companies that have a lot of promise, you could end up with a big payback. Even if you lose on eighty percent of your picks, the twenty-five percent that do work out, will be enough to make up for the rest. - 15224
Penny stocks are share offerings made to investors by companies that are just too small or new to have a listing with the major stock exchanges. They have significant growth potential, and the initial investment can be quite small, but you run the risk of encountering a pump and dump scheme. Like anything else dealing in the OTC (over the counter) market, the buyer should beware.
Choosing penny stocks in a reasonable fashion means having the business model of the company selling them independently appraised. This is like buying shares in any other company that's being publicly traded. It's important to understand the company's business model, what they're doing, who's competing with them, what they make and what products are being offered.
One of the most appealing things about penny stocks is that the majority of businesses offering them are quite simply put together. One typical type is that of a mining company, which will only be profitable when the price of the material it mines reaches a certain level. There are also some oil exploration stocks which use this kind of valuation.
Penny stocks are rated as a high risk vehicle by the Securities and Exchange Commission. Some of the risks involved include incomplete or indirect reporting of finances, fraud, and limited liquidity. People playing using a day trading strategy, sudden demand on penny stocks can create wide ranging volatility, which also makes it hard to short sell them.
The financial reporting guidelines on penny stocks are actually pretty loose. Unlike the national exchanges, not much is required of companies that list this way - in fact, sometimes these stocks will just de list for a few days! In the investment type called Pink Sheets, penny stocks have nearly no regulatory requirements at all, including few to no minimum accounting standards or reporting guidelines.
Because these stocks aren't standardized and don't have an generally accepted requirements for accounting, they can be extremely vulnerable to being manipulated or even just plain fraud. People posing as independent observers can encourage people to run up the price, then they sell and de list the stock. This is the classic pump and dump scam.
Now, that doesn't mean you should be scared off of these stocks entirely. There are lots of real, legitimate start up companies, and they have to get going somewhere. Anyone who can pick a winner will get a handsome reward.
If you're someone who can spot companies that have a lot of promise, you could end up with a big payback. Even if you lose on eighty percent of your picks, the twenty-five percent that do work out, will be enough to make up for the rest. - 15224
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