What are Penny Stocks?

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You may have from time to time heard of penny stocks but may not be sure of exactly what they are but there is no secret or sinister about them, they are merely shares in companies which are too small to be considered worth trading on the main stock markets like the NYSE or NASDAQ. These companies total worth is probably less than $50 million and so often the price of one share is just pennies as opposed to the many dollars a share of a blue chip company on the larger stock markets. Like the big shares or more expensive shares though, these penny shares do fluctuate in price and so although you may not make as much on penny shares, you can make just as large percentage gains it is just that your investment is usually less and so the profits can be less.

That though does not mean that you cannot make real profits from trading in penny stocks as there are some penny stock millionaires. In all honesty though, these penny stock millionaires are few and far between because it is considered that only 10% of all penny stock investors make any kind of profit, let alone millions of dollars of profits. OF course though, even the largest of the corporations today, were small at one time and so if you are able to buy shares in a company when it is small and keep those shares whilst the company grows into a huge corporation, your shares will have risen dramatically in price. You can learn more about penny stocks at http://www.moneysoldiers.com/how-to-buy-penny-stocks-the-basics/ but basically why you hear less about these than regular shares is because many investors consider them more of a gamble than an investment and they may be right as, although penny stocks are shares in companies, the companies that are issuing the shares are too small to trade them on the larger stock markets which means they do not come under the control of the Securities and Exchange Commission (SEC).

How this makes a difference is because if a company does come under the control of the SEC, it is required to give a certain amount of information about it so as to allow an investor to know what they are investing in. The smaller companies are not duty bound therefore to divulge any information about themselves, possibly forcing a penny stocks investor to not know exactly what they are investing in which is of course more of a risk and so to some becomes a gamble rather than an investment. However, as with many other forms of gambling, the risks may be higher but the winnings can be great, as the penny stock millionaires have been fortunate enough to find out. As trading in penny stocks does not need as much initial capital as investing in the larger stock markets, some people start as penny stock investors and if they make enough profit to jump to the major stock markets; they do.

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