Penny stocks have piqued the curiosity of investors from a wide range of financial backgrounds. Perhaps there is something interesting in buying penny stocks online for a small amount of money, then watch it grow profit. While educated investors will admit that penny stocks are as predictable as an earthquake, people still wind up investing in it.
Penny stocks can also be called micro-cap stocks, or nano stocks. These stocks might be “pennies” for buyers, but for companies this could be a big boost for startup capital. After all, even the biggest companies have to get capital somewhere. Penny stocks might be a novel term but it is as just as common as any stock in the market. In fact, they take up almost 70 percent of all stocks issued on NASDAQ and in NYSE.
Buying penny stocks online are high risk investments. Due to its low prices, just anyone can come in and invest. As investors will tell you, the mass market can help the prices of these penny stocks swing left and right without settling into a predictable equilibrium. That is why the SEC warns that penny stock traders should be aware of the different risks involved in penny stock trading such as lack of information, fraud, and limited liquidity.
Other pessimists on buying penny stocks point out that it might be harder for a specific stock to be sold quickly once you get a hold of them. The lack of liquidity makes penny stocks more harmful to buyers as it can be easily influenced by market makers, and management. That is why it is best to know the company and the nature of the specific stock. An uneducated guess will hurt you a lot.
Penny stocks are usually traded via OTCBB before online penny stock traders appeared. OTCBB stands for Over the Counter Bulletin Board. It is an overall list for stocks not listed on any of the major U.S. stock exchanges. It includes the price quotations of the stock in questions which allows for easy trading between parties agreeing to a price.
Other penny stocks that do not qualify in OTCBB are usually listed in pink sheets. Pink sheet is an online electronic system that allows swifter and faster tracking of information to help facilitate trading. Most investors look at pink sheet as an unsafe trading environment, while some budding investors see it as an opportunity for growth. There are also penny stock trading brokers found on the internet that will properly guide penny stock traders. This method has allowed more transparency of a once shady system.
Buying penny stocks online has a lot of risks involved and a lot of reward deserved. Just remember that like with everything in life, penny stocks are a trust, and that with any investment made, a part of your trust is as stake. An informed decision on the penny stock that you are buying will give you more leverage as you pick stocks that help you conclude the interests that you have in the long run.