| The definition of a penny stock is any stock that is | | | | the stocks into an open market causing the share |
| trading under the price of $5.00 per share. A penny | | | | holders who bought the stock to take a drastic loss. |
| stock can be found on the OTCBB or in pink sheets. | | | | It can be difficult to evaluate the safety of a small |
| The stocks can be as much as $5.00 or as low as | | | | company. The first things you want to look for |
| .0001 at times even lower. A true penny stock will | | | | before purchasing a penny stock are: the share |
| have less than $4 million in net tangible assets and will | | | | structure of the company, the balance sheet, and |
| not have a significant operating history. Penny stocks | | | | the company's SEC filings. Pink sheet stocks will not |
| are not traded on a stock exchange but are traded | | | | have any filings to check, so use your discretion. |
| in the over-the-counter market. | | | | Share structure is the biggest challenge with penny |
| The majority of people do not purchase penny | | | | stocks, when you find one you are interested in, |
| stocks for long term profits. That is because a large | | | | make sure the float is low and that the authorized |
| number of companies fail. Leaving your money in a | | | | shares are not too high in comparison. |
| stock too long can lead to a significant loss. Yet | | | | Stock picking websites and bulletin boards can be a |
| there are some excellent up and coming companies | | | | great way to find emerging companies, but always |
| who simply need financial backing. Investing in these | | | | do your due diligence. If you have not done your |
| companies can yield large rewards. A penny stock | | | | homework and the price per share drop, the only |
| trader needs to learn how to read charts and do | | | | one you can blame is yourself. The easiest way to |
| their research before investing to ensure they are | | | | protect your assets is to stay away from companies |
| choosing ethical companies. | | | | that have a history of unethical behavior. |
| Penny stocks can be profitable, but there are | | | | Although many penny stock traders are small-time |
| companies to be wary of. Unfortunately there are | | | | investors, it is still very important to analyze each |
| companies that scam investor. These companies | | | | stock. Penny stocks can be a fun investment; |
| often times heavily promote with fabricated press | | | | however it is critical to have a high tolerance for risk. |
| releases and forum hype to drive stock prices higher. | | | | It is a volatile investment, but when there is potential |
| Often times they use these tactics to dilute the | | | | for high gain, there is also potential for great loss. |
| stocks because the company is failing. Or they dump | | | | |