Before you buy penny stocks, it is important that proper understanding of the nature of this lucrative and yet risky investment tool is in place. This article will give you an overview of what to expect if you want to buy penny stocks and also how to obtain reliable information and make calculated risks.
Basically, those who buy penny stocks in the US market are essentially trading in stocks that sell for no more than 5 dollars each. They are often referred to as “micro-cap stocks" and also “nano stocks" because they are generally lower priced securities that are issued by small companies. They are perfectly legal and the trading is overseen by the SEC.
These stocks can move up in price very quickly when they are heavily promoted. If you buy penny stocks before they are promoted heavily, you can make an extraordinary amount of money. They display the greatest percentage gains within the shortest periods of time.
As they typically come with relatively low share price, they can be easily manipulated. Investing in them can be risky just like any stock market investment. But due to the small startup investment, and enormous earning potential if you hit the big time.
Companies offering these stocks on Pink Sheets often don't file audited financial statements or reports with the Security and Exchange Commission. For that reason, the SEC notes that it's often difficult for investors to find reliable, unbiased information about companies listed on the Pink Sheets.
Those who want to trade in these stocks have to realize that trading in these is not for everyone due to the volatile nature of these stocks. Thorough research is required for investors to make calculated risks. Having said that, ability to harness the power of these trading tools will bring in big money.
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