Why Choose Penny Stocks Over Regular Stocks
Penny Stocks1.Results take days/months instead of years
2.High Risk 3.Cost Less 4.High Returns 5.You are investing in start up companies. |
Regular Stocks1.Less Risk
2.Takes longer to see results (boring) 3.Cost's More 4.Less ROI 5.You are investing in proven company's. |
How to Buy Penny Stocks
Like any other stock you'd buy, you can purchase shares of a penny stock through your standard stockbroker -- regardless of whether or not it is listed on a major exchange.
While low-priced stocks listed on exchanges like NYSE and NASDAQ are not commonly considered "penny stocks" per se, they can afford a lot of the benefits of penny stocks without quite so much danger.
Over the Counter Bulletin Board, or OTCBB, is a quotation. Unlike Pink Sheets, which can be only a quotation publisher, OTCBB preserves listing requirements (though they're less strict than those of an exchange). For this reason, OTCBB has a little bit of additional legitimacy.
Pink Sheets is a method that provides investors with quote tips on stocks that are registered by it. Unlike OTCBB, yet, Pink Sheets is not filed with the SEC and does not apply any listing requirements. Bottom Line: Pink Sheets stocks are uncertain.
The Possible Return of Penny Stocks
Why would anyone want to set his or her cash in a penny stock anyhow, with all the risk entailed? The reply is volatility.
Because penny stocks are prone to violent fluctuation (unpredictability), many folks believe that they'll luck out with a stock that may jump from $0.08 to $8 in two weeks. And it's occurred. Scour enough investing message boards and you're certain to find success stories from investors who made a mint while "playing the pennies."
Amounts fluctuate quite a bit in the penny stock world, but investors have raked in gains over 1,000% in a couple weeks' time. The actual trick is locating the appropriate stock.
The Hazards of Buying Penny Stocks
Even legitimate penny stocks are blighted by very high risk. Two primary reasons that danger is so inherent in penny stock investing are inferior reporting standards and low liquidity.
Liquidity problems can be a tremendous deal for investors, as investors saw most recently with the sub prime lending market. And unlike financing, the penny stocks are plagued by low liquidity on a daily basis. Because penny stock investing is this kind of niche place, even relatively low trade volumes can have a notable effect on a stock's share price. Because it may be difficult to find quotes for specific penny stocks, they may be hopeless to accurately price."
What this means is that if you play with penny stocks you may get a great deal of useless stock which you can't get rid of.
Another concern for investors is the dearth of stringent reporting standards for companies whose stocks trade on OTCBB or in the Pink Sheets. OTCBB does necessitate that registered companies remain present with SEC filings, but those filings are the simple minimum -- well below what an exchange-traded company would have to file.
Since businesses which are delinquent in submitting their filings to the SEC continue to be so accessible to individual investors, penny stocks have proven to be a treasure trove for dishonest people.
That Is 1 of the reasons the SEC has taken such an active job in making certain that the American people is protected from unscrupulous companies and people in the penny stock world. On your broker to even sell you a penny stock, they're lawfully required to send you a document summarizing the dangers of penny stock ownership. There's a rationale brokers and regulatory bodies go to such lengths to make sure that you just're not blindly investing in penny stocks; scammers are around.
What Is With the Penny Stock Spam?
Junk is the scourge of the earth. It fills our e-mail inboxes with crap and garbage, and chances are if you get an adequate quantity of spam, you've seen messages designed to boost penny stocks.
But the spam isn't relegated to e mail. Message boards, chat rooms, discussion groups -- even advertisers on legitimate websites -- are all home with their fair share of the stuff. It goes without saying that you just shouldn't go out and buy a stock that is praised in a sketchy e-mail, but some folks do, and scammers make millions of dollars off of unsuspecting investors.
Among the most prevalent types of penny stock scams out there is the "pump and dump." For help on avoiding pump and dump scams, take a look at the SEC's post on the matter.
How to Pinch Those Pennies
So now that you understand the frightening side of penny stocks, how do you cash in on the possible growth that they have to offer? You can find three things you will need to look for when deciding a penny stock to make sure that you don't get penny caught: Underlying business, financials, and footnotes.
A company's underlying business is even more significant than it is in exchange-traded stocks, when it comes to penny stocks. That's because the penny stock world is house to "shell" firms that are lawfully incorporated, but don't have any business operations. Shell businesses are a superb opportunity for scammers, because they can be readily set up as a "pump and dump" stock. Seek out firms with real, sustainable business operations and you will be one step closer to finding a great penny stock.
Like with any stock, a penny stock's financials are an important tool for investors. But with penny stocks, the question is more about the quality of the financial statements. Does the firm file promptly? Who was the auditing company? Do the company's financials look healthy? It is time to stroll through the footnotes, if you're able to answer yes to those three questions.
In many firms, footnotes are an oft-overlooked, yet very significant part of its filings. And while you might manage to get by without reading GE's footnotes, lose the footnotes for a penny stock, and your portfolio might miss its mark. Since penny stocks are smaller businesses which might be more prone to things like related-party trades and non-GAAP accounting oddities, do not walk around the footnotes for a penny stock.
Judgment
Fact: Penny stocks are inherently unsafe. Fact: Penny stocks can make you a lot of money.
Even with all the dangers and drawbacks involved in penny stocks, many investors simply find that the potential windfalls are really worth it. There's a rationale that penny stocks remain popular among a brave clique of investors: Penny stocks can deliver a very remarkable return. Hopefully, you'll find your new penny stock knowhow makes the Wild West of investing a little more tamable.
Like any other stock you'd buy, you can purchase shares of a penny stock through your standard stockbroker -- regardless of whether or not it is listed on a major exchange.
While low-priced stocks listed on exchanges like NYSE and NASDAQ are not commonly considered "penny stocks" per se, they can afford a lot of the benefits of penny stocks without quite so much danger.
Over the Counter Bulletin Board, or OTCBB, is a quotation. Unlike Pink Sheets, which can be only a quotation publisher, OTCBB preserves listing requirements (though they're less strict than those of an exchange). For this reason, OTCBB has a little bit of additional legitimacy.
Pink Sheets is a method that provides investors with quote tips on stocks that are registered by it. Unlike OTCBB, yet, Pink Sheets is not filed with the SEC and does not apply any listing requirements. Bottom Line: Pink Sheets stocks are uncertain.
The Possible Return of Penny Stocks
Why would anyone want to set his or her cash in a penny stock anyhow, with all the risk entailed? The reply is volatility.
Because penny stocks are prone to violent fluctuation (unpredictability), many folks believe that they'll luck out with a stock that may jump from $0.08 to $8 in two weeks. And it's occurred. Scour enough investing message boards and you're certain to find success stories from investors who made a mint while "playing the pennies."
Amounts fluctuate quite a bit in the penny stock world, but investors have raked in gains over 1,000% in a couple weeks' time. The actual trick is locating the appropriate stock.
The Hazards of Buying Penny Stocks
Even legitimate penny stocks are blighted by very high risk. Two primary reasons that danger is so inherent in penny stock investing are inferior reporting standards and low liquidity.
Liquidity problems can be a tremendous deal for investors, as investors saw most recently with the sub prime lending market. And unlike financing, the penny stocks are plagued by low liquidity on a daily basis. Because penny stock investing is this kind of niche place, even relatively low trade volumes can have a notable effect on a stock's share price. Because it may be difficult to find quotes for specific penny stocks, they may be hopeless to accurately price."
What this means is that if you play with penny stocks you may get a great deal of useless stock which you can't get rid of.
Another concern for investors is the dearth of stringent reporting standards for companies whose stocks trade on OTCBB or in the Pink Sheets. OTCBB does necessitate that registered companies remain present with SEC filings, but those filings are the simple minimum -- well below what an exchange-traded company would have to file.
Since businesses which are delinquent in submitting their filings to the SEC continue to be so accessible to individual investors, penny stocks have proven to be a treasure trove for dishonest people.
That Is 1 of the reasons the SEC has taken such an active job in making certain that the American people is protected from unscrupulous companies and people in the penny stock world. On your broker to even sell you a penny stock, they're lawfully required to send you a document summarizing the dangers of penny stock ownership. There's a rationale brokers and regulatory bodies go to such lengths to make sure that you just're not blindly investing in penny stocks; scammers are around.
What Is With the Penny Stock Spam?
Junk is the scourge of the earth. It fills our e-mail inboxes with crap and garbage, and chances are if you get an adequate quantity of spam, you've seen messages designed to boost penny stocks.
But the spam isn't relegated to e mail. Message boards, chat rooms, discussion groups -- even advertisers on legitimate websites -- are all home with their fair share of the stuff. It goes without saying that you just shouldn't go out and buy a stock that is praised in a sketchy e-mail, but some folks do, and scammers make millions of dollars off of unsuspecting investors.
Among the most prevalent types of penny stock scams out there is the "pump and dump." For help on avoiding pump and dump scams, take a look at the SEC's post on the matter.
How to Pinch Those Pennies
So now that you understand the frightening side of penny stocks, how do you cash in on the possible growth that they have to offer? You can find three things you will need to look for when deciding a penny stock to make sure that you don't get penny caught: Underlying business, financials, and footnotes.
A company's underlying business is even more significant than it is in exchange-traded stocks, when it comes to penny stocks. That's because the penny stock world is house to "shell" firms that are lawfully incorporated, but don't have any business operations. Shell businesses are a superb opportunity for scammers, because they can be readily set up as a "pump and dump" stock. Seek out firms with real, sustainable business operations and you will be one step closer to finding a great penny stock.
Like with any stock, a penny stock's financials are an important tool for investors. But with penny stocks, the question is more about the quality of the financial statements. Does the firm file promptly? Who was the auditing company? Do the company's financials look healthy? It is time to stroll through the footnotes, if you're able to answer yes to those three questions.
In many firms, footnotes are an oft-overlooked, yet very significant part of its filings. And while you might manage to get by without reading GE's footnotes, lose the footnotes for a penny stock, and your portfolio might miss its mark. Since penny stocks are smaller businesses which might be more prone to things like related-party trades and non-GAAP accounting oddities, do not walk around the footnotes for a penny stock.
Judgment
Fact: Penny stocks are inherently unsafe. Fact: Penny stocks can make you a lot of money.
Even with all the dangers and drawbacks involved in penny stocks, many investors simply find that the potential windfalls are really worth it. There's a rationale that penny stocks remain popular among a brave clique of investors: Penny stocks can deliver a very remarkable return. Hopefully, you'll find your new penny stock knowhow makes the Wild West of investing a little more tamable.