What Are Penny Stocks? Answers to Frequently Asked Questions About Penny Stocks

Many people wonder about penny stocks. They may be interested because they have heard that investing in these types of stocks can be very lucrative. Although it can be profitable, they can also be very risky. This article will explain in detail what are penny stocks.

Many people new to investing think these type of stocks are worth just a few “pennies.” In the United States, many people identify a stock as a “penny stock” when the trades are for less than $5 a share. The stocks advice newsletter I use for hot picks, considers trades as this type when the price per share is $2 or less.

Some people in the United States financial and stock markets consider ANY stock, regardless of price, that is traded outside of the major exchanges, which include NYSE, NASDAQ or AMEX, as this type. In addition, investors may also “disapprove” of these types of stocks as being fraudulent or beneath their consideration.

The Securities Exchange Commission’s – SEC, official answer to the question of “what is penny stock?” is — any low priced stock share from a small company that is trading through quotation services or major exchanges. The term is based solely on the price of the share, not on who lists it.

Although the SEC officially states it doesn’t matter where these shares are traded for them to be defined as such, these stocks are usually traded over the counter (OTC) through quotation services like OTCBB – Over the Counter Bulletin Board, which is an electronic quotation system in the US that displays real-time quotes, last sale prices and volume information of OTC equity securities not listed on NASDAQ or any national securities exchange. They may also be traded OTC through Pink Quote or Pink Sheets, which displays quotes from broker-dealers for OTC securities.

Many new investors think penny stocks are the best way to begin investing. Yet, as I have learned through the expert Stocks Advice Newsletter I receive, if you do not complete your due diligence in researching and analyzing any stock purchase, you can almost be certain that you will lose your money.

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