Understand Penny Stocks

Investment and stock market lingo can be confusing sometimes, but it is important to know about the economy. Here is a brief tutorial on what penny stocks are.

Know that a penny stock is a stock investment that is traded in the market (usually small markets as opposed to the major exchanges) for substantially low prices.

Step2

Realize that penny stocks in many cases are considered fairly risks due to their decreased capitalization and their prices. Why are they so cheap after all? Another thing to consider is that penny stocks are not as well researched and information about them are often minimal to say the least.

Step3

Remember though that even with its low price, is it worth it to risk money on an investment that doesn't have a lot of following or a confident history behind them? Remember, penny stocks are not actually sold for a penny! You do have some sort of investment in them, so you must weigh the pro's and con's of the lower price with the higher risks. Most penny stocks though sell for less then a few dollars per share, and there are some bigger name companies that do sell shares for this amount so looks can be deceiving! It is always best to research the stock and its company before buying. It will save you more money in the process.

By ehow.com