Penny Stocks – Ideal for One and All
The word Penny Stocks is sweet as music to hear and sweet on your pocket too. As the name suggests, these stocks which are also known as cent stocks refer to the shares of small public companies that are sold for a value as little as $5 or even $1 at times. These shares are usually traded at relatively lower prices outside the major stock exchanges. A collection of such low priced shares are called as microcap stocks. These stocks are considered to be as highly speculative as there is a lot of prediction going on around the business market regarding these stocks. There are some minor risks in investing but it is just normal in engaging yourself in this business. On the contrary, the advantage outweighs risks which eventually can be a large potential for profit.
Low liquidity potential of these stocks is also a cause of their being rarely traded in the market. This is one reasons they at times they can be manipulated and their prices to be increased but not enough for them to be listed in market listings. Such stocks are called as hot penny stocks. Though their prices increase little by little, they are still not liquid enough for the investors to sell them and earn liquid cash. One major problem with such such stocks is that even the companies find it difficult to list them with the major trade exchanges due to their illiquidity.
It is important for the new investors though to keep a check on what shares they are planning to buy a lot of them are sold without proper information to overseas investors. This is a case of fraud and it’s the duty of the investors to make sure they obtain all information about such stocks before they invest their hard earned money into them. Prices of these stocks can also be artificially increased and this is called the pump and dump terminology in the finance share market. In pump and dump the prices of these penny stocks are increased through false and misleading information and positive statements passed about these shares. Way back on previous years, this type of micro cap stock fraud had caused a minor stir in the finance and share market for several times.
The stocks known as penny are mostly traded over the counter on the OTC Bulletin Boards, Pink Sheets, and NASDAQ etc. These stock shares have been included in the unlisted securities because mostly came from a very small public company which fail to meet the listing requirements. Unlisted security is also known as over the counter bulletin boards or OTCBB and that is the only way by which you can trade these stocks and shares. Many countries also use the word unquoted in place of unlisted. The penny stocks are usually offered along with a newsletter regarding the performance of the stocks and in case a company fails to publish all information in a newsletter it becomes the responsibility of the investor to ask the owner to provide him with detailed information before he makes the investment decision.
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