A penny stock is basically a type of security you can invest in where a share will just cost you a $5 or less.
The low capital requirement is a very good opportunity to invest.
But there are more to investing in penny stocks.
It is not the same as the common stocks people usually invest on.
Investing in these lower priced shares needs a little more knowledge that usual.
These stocks are often offered by smaller companies.
These cheap priced shares are very volatile.
Prices go up and down instantly.
These shares are also not liquid.
There is little repay guarantee if the company suddenly closes down.
Penny shares are very hard to predict.
The companies offering them less frequently give out information on financial activities to the public.
Companies would also offer higher commission rates to go with these penny stocks.
These stocks have also been used to scam some investors.
It is mandatory that to avoid these risks, an investor carefully studies every detail there is regarding the share and the company offering it.
When it comes to investing in these stocks intelligence and experience are required.
These shares are not for the new investors.
They should try out less risky shares first, though the low capitalization can be quite attractive.
Investors need to know the risks and red flags when investing in these stocks.
These kinds of instincts can only be attained through experience.
These shares can make you a fortune if handled well.
Penny stocks are very attractive to those that have little to invest.
However, little knowledge and experience in investing can totally send you out of the stock market.
One cannot rely merely on other's perception.
You have to know how to read every detail made to the public.
These stocks are very risky, but it can make you big money if you do know how to manipulate these risks.