
		HOME \| Membership Websites \| SMM Solutions \| CRM Solutions \| Online Training Systems \| Publishing \| Clients \| Guarantee \| Log In

The Profit Potential Of Penny Stocks

Submitted by Patricia Adcock | RSS Feed | Add Comment | Bookmark Me!

Penny stocks, as the name suggests, are shares that are available at extremely cheap rates. Being available literally for pennies, you can purchase such stocks for as low as $2 per share. These stocks are usually of very small companies, which have a market capitalization of less than $500 million. They are not traded at the major stock exchanges like NASDAQ or NYSE, but are listed in the pink sheets or the OTCBB (Over The Counter Bulletin Board), because these stocks are of companies that are unable to meet their listing requirements. They are also referred to by other names such as pink sheet stocks, nano stocks, small caps, micro caps or juniors.

Investing in penny stocks is considered very risky as they are traded without any regulatory or listing requirements, which provide security to shareholders. There are no accounting standards, and the shareholder gets no information about the change of ownership of shares etc. This makes it a potential source of fraud.

However, with proper research, investment in penny stocks can be a tremendous earning potential. Not all companies listed with pink sheet stocks should be considered fraudulent. Some of them represent good companies, which are too small to meet the requirements of the NYSE or NASDAQ. Many such companies have a bright future. Unlike blue chip stocks, penny stocks have greater volatility; hence, they have the potential of sometimes reaping rich dividends in a relatively short span of time. Thus, investing in these startup companies at rock bottom prices can end up in making investors very wealthy.

However, finding these companies requires research. The number of shares that the company has on ‘float’ is one indicator that needs to be ascertained. ‘Float’ is the technical term for the number of shares of the company being traded. Since penny stock companies are unregulated, they are not bound to report these details to the public. The information, however, can be found in TV interviews, and the like, given by the representatives of the company occasionally, and are sometimes archived on their websites. There are forums on these websites where stock brokers chat with each other. You can also get the information on the message boards. Find and read the articles and reviews written about the company, which will give you a good idea of the float. For instance, if a company’s float were very high, it implies that it is merely issuing extra ones to keep afloat, hence would not be worth investing in. Companies that have five million to one hundred million shares are considered fit for investment.

The product of the company also needs to be scrutinized. For example, it is important to find out if the company would face obstacles in selling its products for various reasons, or whether patent issues would allow some other company to introduce a similar product in the market, all of which would affect the value of the stocks. Another important consideration would be whether the product is going to find appeal with the target consumers.

While investing in penny stocks may be more perilous than putting your money in bonds or the shares of established companies, the chances of striking it rich is also a strong possibility, which makes it a risk well worth taking.


Contact Us Support and Sales

LinkedIn Recommendation:

Lana Cicen - Project Coordinator at The Hope Financial Services, Inc - I had Teo help with my non-tech project I was working, which was a triage system for a construction company - all paper. Teo made it work more efficiently and explained how the new system could be upgraded into a computer program, which included inventory management online. I love this guy! Always one step ahead. I just hired him again make this our phase 2 project. If you are looking for a process guy, Teo is it! - March 17, 2012, Lana was Teo's client

Featured [Investment] Articles:

Net-Teams - Helping Businesses Prosper With Custom CRM, SMM and Online Training - Net-Teams, Inc. (NTI) is a technology and marketing firm and offers access to a core set of system t...

The Benefits Of A Membership Program For Your Website - Building membership through your website allows you to automate the acquisition of prospects and cus...

eWorkshop Hosting - The More Effective Way to Build Your Business with Online Ed - More and more companies are using eWorkshops to reach out to customers, prospects and employees. An ...

eWorkshop Publishing From Net-Teams - As many people are discovering, self-publishing is a time consuming venture, which takes time away f...

What is Social Media Management And Why Is It So Critical? - Whether or not you have a customer relationship management (CRM) system in place, there is one key r...