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{Introduce Yourself To Penny Stocks}~{Get To Know Penny Stocks}

There may be no fixed definition of what a penny stock is, but there’s also no reason why people looking to get into the market shouldn’t consider them.

Some investors consider penny stocks to be those valued under a dollar, while others place the top-end threshold at two dollars or even five dollars. The main determining criteria, however, is that the stocks trade at a relatively low price (often less than one cent per share) and market capitalization outside of the major market exchanges.

Penny stocks can be volatile, so potential investors shouldn’t enter the market blindly. There are some key basic points to consider and facts to know before you make the plunge. In the remainder of this article, you’ll be able to find out valuable information about:

  • what penny stocks are;
  • where penny stocks are generally traded;
  • the risks and rewards associated with penny stocks;
  • why you should consider investing in penny stocks, and;
  • the types of penny stock companies you should consider investing in.

Penny stocks are often traded over the counter through the Over-The-Counter Bulletin Board (OTCBB), a regulated electronic trading service offered by the National Association of Securities Dealers (NASD) that shows real-time quotes, last-sale prices and volume information for over-the-counter (OTC) equity securities. Companies listed on this exchange must file current financial statements with the United States Security and Exchange Commission (SEC) or a banking or insurance regulator. There are no listing requirements, such as those found on the Nasdaq and New York Stock Exchange, for a company to start trading on the OTCBB.

 

Another main venue for OTC trading is Pink Sheets, a daily publication compiled by the National Quotation Bureau with bid and ask prices of OTC stocks, including the market makers (broker-dealer firms that accept the risk of holding a certain number of shares of a particular security in order to facilitate trading) that trade them. Companies quoted on the Pink Sheets system don’t have to meet minimum requirements or file with the SEC. And in case you’re wondering, the system got its name because its quotes used to be printed on pink paper after it was first established in 1913 before going online in September 1999.

Penny stocks may not carry the prestige of owning traditional blue chip stocks or the glamor associated with having shares in more recent market darlings like Apple or Google, but they’re definitely a lot more affordable. With just a few thousand dollars, investors can create a diversified portfolio of  hot penny stocks  – as opposed to holding a relatively small amount of more expensive stocks.

While there may be risks associated with investing in penny stocks, they can also reap rich rewards and increase in share price by hundreds of percentage points after being purchased for bargain prices. Penny stocks are generally held for a shorter period of time by investors, which can make them attractive to people who don’t have the patience to wait for years for their investments to start issuing strong returns. The potential short-term profits made with penny stocks can quickly be turned around and used to generate more profits in other companies.

New investors may find penny stocks attractive because they can learn the basics of buying and selling for a relatively low price. More seasoned traders may indulge in them to increase their portfolio’s diversity and exposure to certain sectors as part of a hedging strategy. Either way, trading penny stocks can often provide more excitement than established blue chips. Just make sure you learn the appropriate lingo, understand basic concepts, set out goals that you hope to accomplish and know your financial limitations before you jump in.

The key to wise investing in penny stocks is finding companies with perceived potential, a good story to tell (even if there’s not yet any revenues or a product on the market) and shares with superior speculative value. Since small operations can’t compete with the economies of scale enjoyed by large corporations, it’s often beneficial to find those with a niche market offering products or services where there’s less competition and, therefore, more room for potential growth. Companies that are acquisition targets can also be good candidates, as takeovers can often increase share values of the organization being purchased.

et often don’t trade in the large volumes of large cap corporations, and that lack of critical mass makes standard technical analysis difficult or impossible. They also have lower reporting responsibilities and don’t have to disclose all of the details that corporations that trade on the major exchanges do. So while finding out as much information as you can about them is prudent, it’s also often difficult. Little financial data may be available and disclosure levels can be minimal or sometimes even non-existent.

For these reasons, it’s important to consider companies that offer strong investor relations and marketing capabilities – either on their own or through specialized companies like Mina Mar Marketing Group. Those that offer regular news updates and aren’t shy about releasing information or telling investors what they’re up to are more transparent and don’t look like they’re trying to hide things, which should offer a degree of comfort to people considering investing in them.

Building strong brand awareness, an informative web presence with search engine optimization and a positive public image can help maximize market position, revenue, visibility and growth for penny stock companies. And those which have all of these things in place are where investors should consider investing their money.

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