What Are Penny Stocks?
The idea seems to make sense for an investor with very little money to invest – focus on stocks that cost very little to try to slowly but surely build money. That’s one of the reasons that penny stocks are popular in America. These are all small-cap stocks that can be very volatile. In fact, the Securities and Exchange Commission once warned that, “investors in penny stocks should be prepared for the possibility that they may lose their whole investment.” Investors that have been successful with penny stocks agree and have said no one should rely on penny stocks to build a retirement nest egg. However, if you have some money to gamble with, penny stocks could provide a very interesting experience.
Over the counter. The first thing to understand about penny stocks is that you won’t find them in the New York Stock Exchange listings. They aren’t a part of the NASDAQ either. Instead, they are sold through listing services such as the Over-the-Counter Bulletins Board, known as the OTCBB, and Pink Sheets. If you have a broker, he or she can help you make trades with penny stocks just like they can with big stocks or equity funds.
Why so volatile. It’s possible to make a lot of money in a short period of time trading Penny Stocks. But, at the same time, it is even more likely that you could lose some or all of your investment, The reason, according to experts, is that penny stocks aren’t nearly as well known as the larger stocks that are included on the big exchanges. Also, penny stocks are subjected to all of the same federal scrutiny and regulations as larger stocks.
Penny stock tips. Experts like Tim Grittani, who began to invest his $1,500 life savings as an 18-year-old in penny stocks know the potential of these small companies. Grittani was motivated by Tim Sykes, who wrote a book about investing the $12,000 in gifts he received for his bar mitzvah and turning that into millions in dollars during his college years. Grittani had pretty good success also. In four years, he built up his $1,500 into just over $1 million. Grittani said he read all he could about penny stocks and learned that less than ethical investors would invest in particular stocks to boost the price and then send out emails in the thousands to urge others to take advantage of the stock. By picking up on the clues of a stock that was about to fall, it was possible to take advantage of make money in a short period of time – sometimes less than a day. Grittani and other penny stock investors emphasize that investors should only use money they can afford to lose because of the extreme volatility with penny stocks.