| If you are looking for a way to begin investing in the | | | | sold outside the major exchange forums. |
| stock market, penny stocks can be a great place to | | | | Risks Involved |
| start. Most new investors do not have a lot of | | | | The nature of penny stocks makes them a more |
| money to work with. Even if they do, no one wants | | | | unpredictable investment. However, since their value |
| to blow hard-earned money due to a novice error. | | | | is small, you won't necessarily lose a lot of money if |
| This is why penny stocks are such a great choice for | | | | your investments go sour. (Just don't purchase a |
| new investors. Companies whose stocks sell for | | | | bazillion of them at once...) But it is very easy for the |
| pennies tend to be new startup businesses or those | | | | value of the stocks to go up, so there is also |
| that have been performing poorly. | | | | significant potential for profit. |
| This doesn't necessarily mean the companies are | | | | Trading penny stocks requires good fortune nearly as |
| doomed to failure. But a nice benefit for an investor | | | | much as skill and knowledge of the market. Since |
| is that when stock values are so low, it is relatively | | | | these stocks may not have much past stock |
| easy for their value to increase, unless the company | | | | performance to evaluate, it becomes a guessing |
| simply collapses completely. Even then, some of | | | | game at whether the company will be a success. |
| these companies rebound. | | | | The element of "rolling the dice" has a more |
| However, since they are either new or at risk of | | | | prominent place with penny stocks than in other |
| financial collapse, investing in them can be more of a | | | | forms of stock market investments. This makes |
| risky situation for you. However it also is potentially | | | | them ideal for beginners because you can sometimes |
| very profitable. | | | | get away without knowing a lot about the market if |
| What is a Penny Stock? | | | | you happen to stumble across a good one. |
| Penny stocks are company shares that trade for less | | | | (Remember, start off only buying a few, not a |
| than $5 per share, according to the Securities and | | | | bazillion.) |
| Exchange Commission. (Some less official definitions | | | | You have to go in knowing the odds are stacked |
| would say that penny stocks are those that sell for | | | | against you with this type of stock because the risks |
| under a dollar per share, or even at fractions of a | | | | are much higher. But you simply use the failed stocks |
| penny.) Basically, they are just very low-priced | | | | as a learning experience for the future so you can |
| stocks, trading for a few dollars or less. | | | | avoid the same mistaken twice. |
| Penny stocks are not usually traded on any of the | | | | Clearly, penny stocks are not for everyone. But if |
| major exchanges, such as the NYSE, AMEX, or | | | | you don't mind taking a chance and are willing to risk |
| NASDAQ exchanges. Rather, these are bought and | | | | some money, then it is certainly worth a shot. |