Just as it is a universal fact that the sun rises from the East, it is also a fact that opportunities of higher rewards are underlined by higher risks. While the risk averse may settle for a fixed deposit in a large bank, the more enterprising might take up the task of going in hunt of goldmines! What about the majority of population that falls in between? What are the chances that they find some avenues that give them more than average yield, with moderate risk? While there might be a plethora of such avenues, the most popular among them should be the Stock Market. Even the stock market is not a homogenous entity, within that are blue-chip stocks, midcaps, penny stocks and so on, each with their own behavioral characteristics. If blue chip stocks belonging to the well established companies are like elephants – large, stable but slow moving, the penny stocks are the busy bees, restless and unpredictable. It is this penny stocks we will be focusing our attention to in this article.
Penny stock is a stock that trades at a relatively low price and has a low market capitalization. While some people believe that penny stocks are those which trade for less than $5, others hold the belief that penny stocks are those that trade for a few cents. In general, such shares are usually traded outside of the major stock exchanges. These shares are generally traded over the counter (OTCBB) and pink sheets. Because of the low value of these shares, for many brokers, there is a threshold limit beyond which they will not spend money on researching on these shares. Hence getting information on these shares can prove to be a daunting task.
While many amateur investors are lured to the appeal of investing in penny stocks due to its low price and potential for rapid growth, one thing which one needs to remember is that penny stocks are not a "get rich quick" scheme. Although people have made a substantial profits and even a fortune, one may stand to lose everything that one has invested. Further, a stock trading on the Pink Sheets has little to no regulatory or listing requirements, making it more vulnerable to risks. So, while some of these penny stocks have risen from just a few cents to ten twenty dollars in a short span of time, several others have simply vanished, taking the shareholders wealth with them. Hence it is important that one does some research to learn more about the company's growth potential.
Investing in penny stocks can be tricky. One would need expert guidance to be successful. While there are several websites and portals offering investment advice, very few actually offer resources to make a person a better investor. Penny Stocks Guide is such a resource, offering comprehensive information for both the amateur and the expert. It is a comprehensive and neutral resource for investors interested in penny stocks. It lists the entire process about how can one get started investing in penny stocks. For instance, the very first thing that one needs to do is to open a brokerage account with any brokerage service. The website also lists advice on how investors can protect themselves from losing money if they had invested in the wrong stocks. It also lists resources about the basics of investing. A whole section is dedicated to finding the best penny stock companies. There is a section that contains unbiased information sources for the aspiring penny stock investor - an investment message board, and a leading newsletter for penny stocks.
One can be excused for losing money on penny stocks, but there is no excuse for not doing his homework.