|
Home
Back to resources
According to official Securities & Exchange Commission, penny stock is a low-priced, speculative security of a very small company, regardless of market capitalization or whether it trades on a securitized exchange (like NYSE or NASDAQ) or an "over the counter" listing service, such as the OTCBB or Pink Sheets. Penny stocks generally have market caps under $500M and are considered extremely speculative, particularly those that trade on low volumes over the counter. The Securities and Exchange commission warns that, "Penny stocks may trade infrequently, which means that it may be difficult to sell penny stock shares once you own them. Because it may be difficult to find quotations for certain penny stocks, they may be impossible to accurately price. Investors in penny stocks should be prepared for the possibility that they may lose their whole investment."
Penny stock can provide high return but also with high risk. Penny stock has low price and has a potential rapid growth. They also have high bid/offer spread, making their up and down movement very fast.
The important risk for penny stock is low liquidity. This means that it is hard to sell the stock. Because of that, price fluctuation is very high, and is vulnerable to manipulation by management, market makers, or third parties.
Due to its risk, I highly do not recommend penny stock. Unless you know that the company has good fundamental.
|
Did not find what you are looking for? Try this google search.
|
TRY
SwingTracker FREE for 4 Weeks
NOW