The Penny Stock List: What Are They and Who Are They Right For?

Have you heard the term “penny stock” and its potentials to generate profit? Do you wish to know if the penny stock list will best suit you?

The definition of penny stocks has evolved over the years. Its name is not as strict as you may think it is. Today, penny stocks are anything worth under $5.

There are also numerous articles that discourage people from investing in penny stocks. Financial advisors claim they’re not worth investing but that might always be the case.

So what really are penny stocks? How do they work? Are they worth your time and money?

Continue reading below, as we try to break it down:

The Nature of the Penny Stock List

First, let’s get a better understanding of what penny stocks are. These are stocks that have relatively low prices. They also have small caps.

Experts consider stocks that have a value below $5 as penny stocks. However, investors do not consider stocks under $5 as penny stocks if they are trading in NASDAQ and NYSE.

They are “over-the-counter” in essence. This means you can buy them easily without having to through a centralized exchange.

If there is such a thing as the Wild West of Wall Street, the penny stock list is the first thing that comes into the minds of investors. Penny stock trading is often linked to corruption and scams.

You can make epic gains from cheap stocks. But remember that these stocks are speculative in nature.

You can lose tons of money from it.

The Risks of Penny Stock Trading

Now let’s take a look at the risks you will face if you decide to buy penny stocks:

1. New companies

The first thing you will notice when buying penny stocks is that the companies that offer them are new. Thus, they have very little history and track record. With such small data, it is hard to predict their performance in the long run.

Learning the background history of companies is crucial when buying stocks. Their history will give you an idea of how the owners manage the company. It will give you a foresight if the stocks will rise or crash in the foreseeable future.

2. Harder to sell

Another downside of penny stocks is that they are harder to sell. Compared to listed stocks on major exchanges, penny stocks are less liquid. This also makes stocks prone to manipulation.

3. No standards in place

Penny stocks to do not have to meet any minimum standards. Companies that are in NYSE, on the other hand, need to fulfill certain requirements. These requirements are in place to protect the investors and minimize the risks.

Is it a “Go” or a “No”?

Investing in penny stocks is not for everybody. But if you want to give it a try, consider these key points below:

1. Learn the techniques

Learn the techniques in penny stock trading. Find the strategy that best works for you. Most penny stock investors use technical instead of fundamental analysis.

Talk to a reputable stock broker for guidance.

2. Follow what’s hot

Read about the hottest penny stocks in the market today. Do a lot of reading and learn from reputable sources. Arm yourself with as much knowledge as you can.

3. Determine your risk appetite

You need to determine your risk appetite level. Keep in mind that penny stocks are volatile. They come with a lot of risks.

If you feel that you can take a major hit, then proceed with caution.

Improve Your Portfolio, Today!

Investing in a penny stock list has its pros and cons. It is also one of the many different ways you can beef up your investment portfolio.

If you wish to learn more, feel free to check out our other articles. Here’s one listing effective ways to build your wealth.

Join our newsletter

If you like Critical Financial, subscribe and get our latest content via email.

Powered by ConvertKit

Share this post:

Leave a Comment