Penny Stock Investment
Any stock that is not traded on the big three stock exchanges of the NYSE, NASDAQ, and AMEX, is considered to be a penny stock in the United States, although technically the SEC considers any stock trading under five dollars a share to be a penny stock. New investors are attracted to penny stocks due to their low price, and their appeal for potential fast and massive gains. However, such investments are very volatile often gaining or losing large percentages in just a few days.
Acquiring reliable knowledge about companies is the secret to investing. Unfortunately, information about penny stocks is hard to find and this is one reason they are so risky. Companies that are listed as penny stocks are either newly formed and have no history, or do have a history with a poor track record. Another reason they are so risky is because they are not regulated.
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At most, all a penny stock company has to do is to make sure that they file with the SEC on time. In other cases, companies are not required to file with the SEC at all and thus remain unregulated. In fact, this may be the reason the company has become a penny stock, because it was listed on one of the big three exchanges, but failed to uphold its reporting requirements to the SEC.
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In addition, a lot of the information that is available about these companies is not credible. People often think that large companies started off as penny stocks, but this is always not the case. What they are mistakenly looking it is the adjusted stock price. The adjusted stock price does not take into consideration any splits the company has. What happens here, is that people assume the stock started out as a few pennies and worked its say up into the $100 range it is now.
However, what usually happens is that the stock starts out at $20, gradually works its way up in price and splits many times in its history. The biggest risk with penny stocks is that they are used by a lot of fraudsters. Due to a lack of regulation and oversight, these stocks are used by fraudsters for “pump and dump” schemes. The fraudsters buy into the company and then promote it.
Once people start buying in, the fraudsters cash out all their stock and make a nice profit, leaving everyone else holding the bag. Ways of promotion include sending spam mail and paying off figureheads on television and radio to promote their stock. Always make sure to never to buy stocks based on spam. You should also check to see if the media contact owns the stock or is being paid by the company that they are promoting.
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Buying Penny Stocks Over Blue Chips
Penny stocks, these are my favorite types of stocks. But you must understand them before you invest. In short penny stocks are nothing but the exact opposite of BLUE CHIP stocks. Blue chip stocks are those that have been around for a while, and are known to be stable, and usually backed by big Giant Corporations. In short these types of stocks assure of good steady profit. Before you start buying penny stocks, you need to be informed of what you’re getting into.
But penny stocks have a different kind of potential, that most newbies in the stock trading industry seem to overlook. Firstly one considers the price per share in the stock market.Since penny stocks are exactly what its name indicates, the price per share ranges from a few cents to maybe a dollar or two.
So when we look at the price and the range with which these climb up and down in the Intra-Day Market ( Buy and sell the stock in the same day), you need to be aware that you can lose or gain a lot in one day.It’s fluctuations like these that keep many new investors from trading penny stocks.
Now if you look at the details of of a stock you can buy with $100. A Blue Chip company with $100 per share would give you one share at that price, but a penny stock with a $0.10 per share will give you = 10,000 share at that price. Blue chip stocks will rise and fall within a few pennies or a dollar, which counts for about a 1% change. If the $0.10 stock goes up a penny or two, you stand to gain 10-20%. so unlike blue chips stocks, penny stocks have much more room for growth. In a world of Emerging Markets it is these penny stocks that have the potential to grow faster than expected. Provided that you choose the right penny stock, you can make huge gains with them. Take into consideration, that since these companies are new and are trying to make it big, they could also go out of business and you stand to lose all of your investment.
Tags: blue chip company, blue chip stocks, blue chips, Buying Penny Stocks, invest, investor, investors, penny stock, Penny Stocks, profit, Stock Market, stock tradingRelated posts
Buying Penny Stocks – Investing In Penny Stocks
Investing in penny stocks is considered very risky and is not suitable for some one with a low tolerance level for investment risks. Also, most importantly, anyone who is interested in buying penny stocks should do a lot of really good research in choosing the right company to invest to.
As with other high-risk investment vehicle, penny stocks offer high leverage for the investors. A small amount of increase of the price of the stock can make a good amount of money for the investor. It is also very important for the investor to be willing to sit on the stock for a long period and view this investment as a long term gain.
Penny stocks are any stock that trades below $1 per share or sometimes below $5 per share. The shares generally fluctuate in value. Therefore, it is important the understand the movement of its price not only by using technical analysis but also by using fundamental understanding of the company’s assets, growth, and direction.
I would recommend that someone interested in investing in penny stocks would ask assistance from investment advisers. A good way to do it is to subscribe to investment newsletters offering investment advice. Be cautious though in choosing the newsletter that you would subscribe to. If you are on the lookout of a good investment newsletter here are some tips for you:
1. The company offers 24/7 customer service
2. The customer service representatives are friendly, courteous, and professional
3. The editors answers your inquiry either by mail, email, or fax (most editors won’t answer your questions via phone because they are constantly looking for good stocks to recommend)
4. they have good winners to losers ratio in their portfolio (6 winners out of 8 open positions is really hot)
5. And the company provides you access to the company’s model portfolio when you ask for it.
There are so many investment newsletters out there, but if you want excellence, you may want to consider the tips above.
Tags: assets, Buying Penny Stocks, high risk investment, invest, investing in penny stocks, investment advice, investment advisers, investment newsletter, investment newsletters, investor, investors, money, penny stock, risk