Penny stocks are the micro cap or tiny stocks having value less than $5 per stock. These stocks are responsible for trading for the companies with a beginner setup. Penny stocks have the accounting for three fifth of NASDAQ stocks. These stocks are quite popular, but the biggest issue is that they are not predictable and can change their value very soon. Hence, the investors need to be very particular in making the right choice. One wrong move can lead towards negative results.
Penny Stock: Entrepreneur View
Penny stocks have low share price and these are mostly traded in thousands or even ten thousands in number. The investors can accumulate a lot of stocks as per stock pricing is lesser. Let me explain penny stocks with an example. Suppose you have a company with good blueprint and want to sell some products. You can sell your widgets to the entire world, but don’t have sufficient money to produce them. So, you can make the decision to raise money by taking your company towards public. The initial price of your stock will be less, but gradually, the prices will increase with the better need of products in the market. There are chances to sell off millions of stocks at the price below $5. You can sell millions of shares and get profit from your venture. On the same basis, you’ll be sharing the gain with the share holders. Penny stock is the way to get the company on public platform and gaining trust of people by floating your company’s shares at the minimal price.
Penny Stock: Traders View
In case of stock traders, penny stocks can be seen as a number of options. People say that the stocks traded below $1 are penny stocks and others might reveal that the stock with lesser total market value is penny stock. There are different categories in which the stocks should be analyzed to be marked as penny stocks.
But for stock traders, the question “What are penny stocks?” can produce multiple answers. Some will say that any stock which trades for less than $1 is a penny stock. Others say that a stock can be classified as a penny stock depending on the total market value of the company issuing it. Others have specific categories into which a stock must fit before being classified as a penny stock.
Penny stocks can easily go up or down depending on the escalation or degradation of prices. These stocks might be associated with wrong owners as there are many chances for the stocks to get linked with scams. Penny stocks can get profits for you but the chances are that you might lose your money with one wrong move. These stocks are volatile and can’t be held for long term. So, make your right move by choosing the right stocks to be invested at the best time. Penny stocks are opportunity to grow and learn about stock exchange and associated investments in detail. Know about these stocks well before making the investment.