Penny Stocks are not listed on stock exchanges like NY Stock exchange because they don’t meet the listing requirements. While buying penny stocks you must know the fact that listed stocks must have required number of stockholders, assets, and should give financial reports regularly.
These all facts make the penny stock trading the tricky one. For these reasons penny stocks are prone to manipulations. The share price of such stocks normally far under dollar five and they have small market capitalization because company dealing in are itself are of small scale.
Lack of information on penny stocks makes them tricky and it is difficult to find information about the companys financial position and turnover. Due to less public interest and few numbers of investors, penny stock trading volume is normally low. This means that even little purchase and sell can have bigger effect on the share price. The low share cost makes it possible to buy a huge quantity of stock with small amount of money. With lesser share value and limited cash needs, this market usually attracts new traders. Mainly, penny stock trading is considered as game of experienced investors.
Many investors will not get success; some also had to suffer losses. Don’t underestimate the value of research before buying worthy stock else you end up getting burnt.
Everyone wants good returns on their investments, but it is very difficult to find where and how to invest. The most important factor is risk tolerance. Families need to weigh their monthly expenses, only after meeting the needs of kids and home they can determine how much they can invest. Consideration like age also play important role, someone who are older near to retirement age, investment could be the only source of income, therefore he or she can bear minimum risk. One needs to know liquidity of their investment because in case of emergency he can easily sell such stocks right away. In other case like young and single people who don’t have any responsibility can put their income to high risk and high reward investment stocks.
These high reward investment options are also suitable for the persons who have sufficient capital for investment. One of the most famous kinds of such investment is penny stocks. There are plenty of people who made their fortune through penny stock trading. With penny stock trading people can make lot of money, anyone can become millionaire with penny stock trading but this can’t be possible without taking risk.
Penny stocks trading give great platform to new investors. As name suggests Penny stocks have low share price of the small scale companies. These types of stocks attract new investors who have small amount for investment, but ready to take higher risk to make more money.
Investors can purchase thousands of shares because of extremely low share prices with smaller amount of capital. Penny stocks are usually traded over the counter, this means they are not abide by rule and regulations or need to follow accountings procedures unlike the companies who are listed on stock exchanges. There some drawbacks with penny stock trading that every new trader should know before start trading such stocks.
As penny stocks have low trading volume, their prices can fluctuate very easily to considerable extent. That makes such stocks very profitable but this also makes them risky too. Such stocks can be easily manipulated by scam investors. Beware of such people, never take their free advice
Penny stocks are also known as pink sheets have no formal requirement unlike listing stocks. So some companies set up their business only to fraud investors. So avoid Pink Sheet stocks unless you have some reliable source of information on such stocks. Even other penny stocks which are traded over the counter only need to report once in a year, this why one should do his own research before investing money. Investors should enquire about the companies dealing in such stocks.
It’s not impossible to make fortune through penny stocks, but many people also lose money in penny stock market. It’s very critical to do your own research and invest your funds wisely. Don’t take penny stock trading as gambling. Move ahead with precautions and chose your pick wisely. This is the only way with which you can earn good profit from penny stock trading.