| There are a lot of things to consider when you want | | | | stock. However, in a micro cap stock, this would be |
| to buy penny stocks. First of all, you have to | | | | 5% of the total value of the stock. This means if the |
| understand exactly what a penny stock also known | | | | investor had put all his money into this one stock, he |
| as a micro cap stock is. A lot of people do not get | | | | would have gained 5% return in a few minutes. If |
| past this first step, and it costs them greatly. | | | | this sounds lucrative, it is! |
| A penny stock is any stock that is valued at five | | | | However, remember that you can also go down $.10 |
| dollars or less. This definition is not strict, but anytime | | | | in instant, losing that same 5% return. In fact, |
| you have a stock valued at five dollars or less, and it | | | | sometimes penny stocks lose 100% of their value by |
| can generally be referred to as a penny stock. For | | | | simply tanking. When this is the case, investors lose a |
| example, Google stock is valued at around $550. This | | | | lot of money. In order to buy the top stocks, |
| would probably be the opposite of a micro cap stock. | | | | investors need to understand this risk and plan |
| They are attractive to the investors because they | | | | accordingly for it. |
| are highly volatile. People looking to make a fortune | | | | Another concept at play is that these stocks are |
| while day trading are attracted to them, because | | | | cheap. Anyone can buy them, so that means they |
| they freely move up and down with the market. | | | | are traded a lot on the market. This high turnover |
| However, the difference between stocks selling for a | | | | means that they are very volatile as explained above. |
| penny and regular stocks is that when the trader | | | | This high volatility coupled with its low price means |
| buys a micro cap stock, a few cents worth of | | | | that a micro cap stock will frequently undergo intense |
| movement can equate to a high percentage of gain | | | | fluctuations on the market. |
| or loss. | | | | If you are considering buying penny stocks, think |
| This is why buying and selling them are risky. Look | | | | before you buy. Is the company reliable? Is the |
| back at our Google example: if a Google stock went | | | | company safe? Have you heard of the company? Be |
| up ten cents, this would hardly amount to much. This | | | | sure to do your research before you buy penny |
| would be far less than 1% of the total value of the | | | | stocks. |