| Penny stocks are stocks that normally hold a face | | | | the companies that issue penny stocks do not have |
| value of less than $5. Many small companies offer | | | | enough reportable history to learn a significant |
| these low-priced stocks to be traded on the | | | | amount about them for those investors interested in |
| Over-The-Counter-Bulletin-Board (OTCBB) and the | | | | doing research prior to investing their money. This is |
| Pink Sheets. This is mainly because neither the | | | | also due to the fact that the OTCBB and the Pink |
| OTCBB nor the Pink Sheets require the same | | | | Sheets do not have to issue financial |
| minimum requirements as the NASDAQ or the New | | | | statements.Potential for fraud: Penny stocks are |
| York Stock Exchange (NYSE), set by the Securities | | | | often sold through spam email or off-shore brokers |
| and Exchange Commission. Businesses that are new | | | | by con artists due in large part to the lack of |
| or close to bankruptcy may issue penny stocks as a | | | | regulation that penny stocks are not forced to abide |
| quick and easy way for these businesses to create | | | | by or suffer from.Although some penny stocks are |
| quick capital and try to save the business from | | | | fraudulent and others are companies facing |
| having to file bankruptcy in a court.As you can | | | | bankruptcies, this is not true in every case. Quite |
| imagine all of the aforementioned factors- low price, | | | | possibly some of the businesses will one day be listed |
| lack of stability and lack of standards- make penny | | | | on the NASDAQ or NYSE, but are currently struggling |
| stocks one of the most risky investments for | | | | to meet the requirements. The opportunity to start |
| anyone that is interested in playing or trading on the | | | | with these companies from the very beginning can |
| stock market. The fact is most penny stocks do | | | | pay off in the end, given the growth potential. If you |
| actually end up in bankruptcy, but the lure of the | | | | are able to get in on the ground floor with a |
| great payoff if a company does succeed, is enough | | | | company that does find success, you could ride all |
| for many people to pursue the buying and selling of | | | | the way to the top.It can be difficult determining |
| penny stocks. There are many other reasons why | | | | which of these stocks has the potential for growth. |
| penny stocks are risky and it includes:Low or poor | | | | The easiest way to become a victim of fraud is to |
| liquidity: Since penny stocks are not traded very | | | | do little, or even worse, no research. Obtaining this |
| frequently, there may be difficulty finding a buyer. To | | | | information can be time consuming and difficult, |
| interest someone in buying these stocks, the price | | | | unless you have a very good knowledge of what it is |
| may have to be priced substantially lowered.Little or | | | | that you are seeking. |
| incomplete information about the company: Most of | | | | |