Penny stocks are just fun. And terrible. And exciting.
That sums up the definition of penny stocks perfectly. But what exactly is a penny stock? Typically speaking, the common definition for a penny stock is a stock in the stock market valued less than one U.S. dollar.
Penny stocks are incredibly speculative and often volatile.
Though penny stocks can easily be highly profitable, it is important to understand they are incredibly risky. A lot of penny stocks trade on the OTC markets. OTC stands for open, transparent, and connected. But it also simply translates to: Over the Counter Bulletin Board stocks. Read more on: what is the OTC Stock Market.
Unfortunately, just as penny stocks can hold vast fortunes and make you a millionaire, they can also make you broke. Penny stocks are notorious for reputations full of scams, betrayals, and even fraud.
However, this does not mean that, with good research, you can find success for yourself with simple investing.
It’s important to remember that just because a stock has a value of .05 cents, doesn’t mean you’re buying more actual “value” than a stock priced at $100. If you invest $1,000, and the stock goes up 10%, or down 10%, you have gained and lost the same amount.
The main thing to factor in with penny stocks is the fact they are generally start up companies, or failed companies. This means if they take off, or recover, you can have huge rewards.
