Penny stocks also called micro cap stocks are those that are sold for less than a dollar per share and they are the top listed among the penny stocks.
Penny stocks aren’t usually listed on the major stock exchanges but are traded over the counter or on the pink sheet. They are a popular choice among traders even though they are risky. The attractiveness with this type of stock is that you don’t need a huge investment to get started with them and often you can turn that small investment into a huge return.
Some of the major drawbacks of penny stocks are dilution, equity and market risks, low visibility, low tradability and volatility.
You can get advice when choosing penny stocks through a professional broker, from newsletters or using your own discretion. It is not advisable to invest your entire savings in one stock if you are going to trade in the share market you need to be responsible with you much you will invest. As long as you play it safe with the amount that you invest then you can reinvest any profits and gradually grow your investment.
It is recommended to always trade penny stocks through reputable stock exchanges such as Nasdaq Smallcap and Nasdaq National.
You should also consider financial stability of a company, good trading volume and strong business plans when investing in penny stocks.
There are newsletters on websites that you can join that will give you advice from expert stock traders and remember never to invest more than you can afford to.
