Low
priced stocks (share price under $5) are considered "Penny
Stocks". Penny stocks are high risk speculative stocks. Some
penny stocks trade for pennies a share or even fractions of a penny. These
stocks are not followed by Wall Street or stock analysts since many large
investors do not invest in stocks priced under $5 or $10.
There
can be opportunities for big profits if a small company has a good product or
service, is generating increasing revenues and earnings, is well managed with
honest and experienced business executives, is well financed, has sufficient
trading volume, and receives positive publicity that attracts investors.
Gains of 100% or more are not unusual with penny stocks.
Penny
stocks can also be very dangerous and result in a large or total loss of your
investment due to inexperienced or dishonest management, a poor business plan or
marketing plan, lack of focus or direction, poor sales and revenues,
insufficient capital or financing sources, insufficient trading volume, negative
or insufficient publicity and lawsuits.
Stock
prices of some penny stocks are manipulated by unethical brokers, newsletters,
direct mail promotions and firms engaged in high pressure sales tactics on
inexperienced investors and using a "pump and dump" strategy.
This can drive up a stock price rapidly, generating big percentage gains.
Then the early investors sell to take their profits and the hype and promotion
of the stock stops, and the stock crashes, leaving late investors with big
losses.
It
is very important to do your homework and due diligence before buying penny
stocks. Look for good companies with good financials, good management
and good stock charts with lots of trading volume. Don't buy into
stories of what might happen, or should happen. That is
speculation. Look at facts, not opinions or a sales pitch. For
many investors, penny stocks might not be suitable at all. Only
speculative risk capital should be used and it should be a small part of your
total investment portfolio.
We
think working with an Investment Advisor is needed to reduce your risks.
We can assist you in selecting, analyzing, investing, diversifying and
monitoring penny stocks, as well as choosing a brokerage firm to keep your
transaction fees very low and showing you where to find good sources of
information and stock charts.
Click
here for a FREE
CONSULTATION on Penny Stocks.
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PENNY STOCK PROSPECTOR NEWSLETTER.
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gain/loss info, news, research, US, Canadian, NASDAQ, OTC Bulletin Board (OTC
BB) and Pink Sheets stocks.
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