Differences between Small Cap Stocks and Penny Stocks
SEC says that the penny stocks are a security that has a low price and it is speculative. It is traded in OTCBB and Pink Sheets. It is not very important if you trade the stock in major exchange because what defines a penny stock is the price.
Anyone can interpret what exactly a penny stock is because there is no exact figure of this term. Its general feature is the fact that is something that trades with sums that are less than one dollar. If you want to make money from that you need to keep up with the news because penny stocks are pretty sensitive. That is why people that invest in them have a big advantage.
You need to know that are right and wrong ways of playing with those cheap penny stocks. However, you need to remember that every move that happens in the stock is amplified in penny stocks. That means that when the market will go up, the penny stocks will go up more than the market. But the opposite happens also: when the market is down, the penny stocks are down also. You need to understand that this is a generalization but it works pretty well and it is pretty precise also. You need to know that penny stocks are influenced by market demands and the traditional stock exchange doesn’t have a big impact on their move.
You can buy or sold penny stocks on different prices. I know that you are not used to that and you will see it like a thing that is hard to be done and you head will hurt. It is difficult to keep up with it if you do this online and you try to sell or to buy penny stocks in the right moment. The best thing you can do is to set some limits and in this way you will keep your investments safe during the transactions.
You also need to know that penny stocks can get difficult to read. Small caps are transparent. That happens because penny stocks don’t necessarily have to follow the SEC rules and regulations and that means that some financial statements can be wrong or sometimes they might not even exist. Penny stocks seem to release is the press releases and that happens only because they want to provoke some excitement on the stock market.
I didn’t write this article to convince you not to invest your money in penny stocks. I just wanted to highlight some risk that you must be aware of before making such an important decision in your life because it can affect your entire financial situation. Penny stocks are pretty exciting and you can consider them real opportunities of making money. You will get attracted by their tolerance at high risks. Just remember that you must not invest more than you afford to lose and you must keep your portfolio diversified also.
Penny Stocks – Where to Find Penny Stocks?
I am sure that you heard the story too: a guy invested in penny stocks that are no name and he got rich. If you heard that one time, I am sure that you heard many times after that too. You will find out the truth that lies in this story. Maybe you are asking yourself now what a penny stock is and where you can find it. The answer is that a penny stock is a stock that has the price of $5.00 per share.
You need to understand that penny stocks aren’t a part of the 3 major exchanges: NASDAQ, NYSE, or AMEX. They are traded like Pink Sheets. Many people think that not many of us invest in penny stocks but that is not necessarily the truth.
You must be aware of the fact that it can be very tricky to invest in penny stocks. People that are new in this business get lured by the fact that penny stocks increase very fast. However, you also risk a lot because sometimes they decrease instead of increasing like you aspect.
SEC says that penny stocks present a risk that is pretty high and they are marked by a liquidity that is limited, fraud and financial reporting. It is very important to try to investigate as much as you can the source before investing your money in penny stocks.
You need to find a source of information that is reliable and not hurry up to invest in something. You need to be educated in this field and to search carefully before making any investment. Just think about that your money can be lost in no time if you don’t respect those things.
Other stocks are operating with rules and regulations that are determined by SEC. Their investors are usually reasonably and they are sure that they work fair. If you are under the regulation of SEC you will be protected from fraud, manipulations of the market or other illegal sales that sometimes happen. You must be aware of the fact that these regulations and rules are not available in the case of penny stocks.
You need to know that some of the things that you find on the internet about penny stocks are not reliable. However, there are some places where you can find right information and you can also find penny stocks that are good. You need to find a source that is reliable and you must invest everything before taking this high risk. Some websites offer analysis of penny stock companies. If you will study those enough you will be able to get information that will help you to invest in an intelligent manner.
You can also choose to contact a broker that will help you to do that. You must also do some research because this is the most important part of the entire process of investing your money in penny stocks. In this way you will be sure that you won’t lose all you money.