Are Penny Stocks Worth the Risk?
Successful American companies do not grow on trees.
They start with the hopes and dreams of their founders and work their way up from the very bottom.
Very few companies are a exception to this long and risky journey.
A few investors manage to make millions by finding the gems when they are trading for practically nothing and riding them to untold fortunes as the company and its stock explode.
Unfortunately, for every person that strikes it big, there are thousands of investors that lose all their money as the companies they have rested their hopes and dreams on become worthless.
What are penny stocks? Penny stocks can also be referred to as micro cap stocks as they are pretty much the same thing.
Market capitalization is what is used to classify micro cap stocks.
Price is generally what is used when looking at penny stocks.
If a stock has a market capitalization of $500 to $300 million then it is called a micro cap.
The Securities & Exchange Commission identify a penny stock as being anything $5 or less.
Some investors have different definitions and may only consider it a penny stock if it has a much smaller value.
Whether you are talking about micro cap or penny stocks, the number 1 thing to keep in mind is that these type of investments come with a much greater risk and chance of loss.
Why are these types of investments so risky? Little Amount Of Information- One of the most important things to do when evaluating a company is to get the correct information to help you make a informed decision.
These small stocks trade on the pink sheets and the Securities and Exchange Commission do not require them to file.
This makes these companies far less regulated and keeps the out of the public's eye.
This makes finding valuable information on them very tricky.
When you do find information, it is hard to know if it comes from a reliable source or if it is fabricated information the company wants you to see.
There is money to be made with penny stocks, just don't believe the pie in the sky rags to riches stories without doing the proper due diligence.
They start with the hopes and dreams of their founders and work their way up from the very bottom.
Very few companies are a exception to this long and risky journey.
A few investors manage to make millions by finding the gems when they are trading for practically nothing and riding them to untold fortunes as the company and its stock explode.
Unfortunately, for every person that strikes it big, there are thousands of investors that lose all their money as the companies they have rested their hopes and dreams on become worthless.
What are penny stocks? Penny stocks can also be referred to as micro cap stocks as they are pretty much the same thing.
Market capitalization is what is used to classify micro cap stocks.
Price is generally what is used when looking at penny stocks.
If a stock has a market capitalization of $500 to $300 million then it is called a micro cap.
The Securities & Exchange Commission identify a penny stock as being anything $5 or less.
Some investors have different definitions and may only consider it a penny stock if it has a much smaller value.
Whether you are talking about micro cap or penny stocks, the number 1 thing to keep in mind is that these type of investments come with a much greater risk and chance of loss.
Why are these types of investments so risky? Little Amount Of Information- One of the most important things to do when evaluating a company is to get the correct information to help you make a informed decision.
These small stocks trade on the pink sheets and the Securities and Exchange Commission do not require them to file.
This makes these companies far less regulated and keeps the out of the public's eye.
This makes finding valuable information on them very tricky.
When you do find information, it is hard to know if it comes from a reliable source or if it is fabricated information the company wants you to see.
There is money to be made with penny stocks, just don't believe the pie in the sky rags to riches stories without doing the proper due diligence.
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