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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.

Click here for a FREE PENNY STOCK PROSPECTOR NEWSLETTER.

 

Click here for a FREE TRIAL of Quotestream streaming real-time Level 2 quotes and portfolio management software for stocks, ETFs, penny stocks and options.  Includes internet and wireless quotes, indices, charts, portfolio gain/loss info, news, research, US, Canadian, NASDAQ, OTC Bulletin Board (OTC BB) and Pink Sheets stocks.

 

 
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