Penny stocks are organization share offerings available to investors by companies that are just too new or small to have a listing with the bigger share exchanges. Many investors are attracted to these investments since they only need a minor initial cash outlay, however it's important to keep in mind that you encounter the risk of the share value falling to zilch. Investors are attracted to these types of stocks due to the fact that even though there are risks there can also be large payoffs.
When trying to select a penny stock to put money in in you're going to want to know a few details about the business. Similar to buying shares of any other type of publicly traded organization, it's a good idea to read up on everything about the business. This means knowing what the company do, the product they make, which products are offered, how their business model works and who else is involved in their industry.
It's rare that the businesses that offer these kinds of stocks have complex companies - usually they are easy to understand and look into. One common kind of penny share is a resource company that benefits when the price of the resource it extracts goes above a certain price. There are some oil exploration stocks that are valued in the same way.
As you likely have already guessed, penny stocks are thought to be to be investments with high risk. The risks you might have with these stocks include improper of financial information, low liquidity and even fraud.
Reporting rules on penny stocks are not as strict as they are for stocks listed on the national stock exchanges. One of the sorts of penny stocks is known as a "pink sheet" and has almost no regulation when it comes to their reporting and accounting standards.
Since there's very little or even no regulation or standards, this renders this type of stock open to fraud and market manipulation. One of the most common schemes is called referred to as a "pump and dump" - this refers to people manipulating the price of stocks to increase and then sell all of their shares immediately and leave other people out big money.
However, even with that said it doesn't necessarily mean you should be scared off of these shares entirely. There are scores of real, sound start up companies, and they have tons of potential. Tons of organizations that are classified as penny stocks are headed to be a success in the future. If you're able to choose one of these companies, your profits on your purchase of shares will be huge.
If you are able to pick out companies that have potential, your payoff will be massive. You might end up losing money on many stocks, however the one winning selection will offer such a big return that any previous losses won't be an issue.
Finding best penny stocks isn't rocket science - you just need to understand what to look for.
Click here to see a penny stock system that has been generating massive profits for it's users.
Article Source: http://EzineArticles.com/?expert=Grant_Dougan
No comments:
Post a Comment