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Friday, January 20, 2012

What Most People Don't Know About Penny Stocks

What most people do not know about penny stock is the fact that they have generated a soiled reputation. While some of them are great investments others are not. It can be difficult to tell the good stocks from the bad stocks. Investors should weigh the risk and decide if this is the right investment for their needs

Penny Stocks are generally classified as any stock with a value under $5 per share. This is appealing to many investors looking to make it big. Some Penny Stock can be purchased for less than $1. Even though, most people have struck it big with these low budget stocks some people have lost quite a bit of money.

As with any investments there are always risks involved. The lack of information associated with Penny Stocks makes them questionable. Unlike other stocks like gold, silver or apple where information is widely publicized, this is not the case with Penny Stock. In fact, most of the information available about this stock is not from reliable sources.

Many of the stocks are fairly new and have no trading history. Investors are left in the dark as to whether or not they are great investments or if they are approaching a losing streak. Since they have no minimum standards this may be good for investor, since this acts like a safety net and benchmark for both investors and companies.

Investors should also be aware of the possibility of not being able to sell their Penny Stocks because of low liquidity. Finding a buyer could prove to be difficult if not impossible. This leaves the door open for traders to purchase the stocks at a lower price if the owner is forced to lower the price. This is where price manipulation and mistrust comes in among investors, buyers and traders.

What many investors will do is hype up the purchase of Penny Stocks and sells them at an attractive price. This process is known as pump and dump; it seems to work well for new or unsuspecting individuals who are new to trading stocks and looking for a bargain. Penny Stocks attracts the attention of offshore brokers who buys them and resells them back to their original purchaser at an highly inflated price.

Even though, Penny Stocks are low value, low liquidity and risky, there are some stocks that are trustworthy and can really pay off well. Investors need to seek more information about the stock they are planning to invest in.

Friday, January 6, 2012

The Basics of Penny Stocks

The stock market can be an intriguing place for many reasons. Some people look to the stock market as a way to save for retirement while others look at the stock market as a way to make millions of dollars and be set for life. While the attraction of large sums of money is there, not everyone has the means to jump right into the market. Penny stocks are a good way for people of all ages and financial backgrounds to join the stock market and hopefully make money doing so.

Penny stocks are commonly referred to as cent stocks. These are the stocks that fall into the category of being traded at one dollar or less. With such a low price, penny stocks are highly sought after. People tend to buy these stocks in large quantities and hope that the price will rise. The price being so low also leaves the door wide open for manipulation. People and corporations can purchase large amounts of these cent stocks and lobby for these stocks and help to raise the price. The internet has become a tool that is used to help to increase the prices on these cent stocks and people and corporations have seen substantial returns due to this.

While penny stocks do have a large appeal due to their low cost, these are also high risk stocks. Cent stocks come with a high risk for a few reasons. All stocks are traded at their designated cost for a reason. Low priced stocks are not worth much and it is possible that the price will not rise. This is a risk the trader of the stock will have to accept. Another problem traders find is that it can be very difficult to sell penny stocks and they are at risk of losing a lot of money.

Cent stocks are not for everyone but for the people who do want to take the gamble, there is the potential to make a large amount of money. The stock market is not for everyone but for those who accept the risk, they can see great rewards in a short period of time.