Penny Stock Investments - a useful and informative guide to the world of penny stocks.

This article provides valuable insight into penny stock investments and the risks that come with investing in them.
 
 
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Nov. 6, 2011 - PRLog -- What are penny stock investments? The terms "penny stocks" and "micro cap stocks" are often used in an interchangeable manner but there is a technical difference between these two. Penny stocks are classified on the basis of their price while market capitalization is taken into consideration when it comes to micro cap stocks. According to the Securities & Exchange Commission or SEC, any stock is considered to be a penny stock if its price is less than $5. However, this range is debatable among investors. Some set the cut-off point at $3 while others feel that only those stocks which trade at less than $1 can be considered the kind of stocks.

One point that needs to be emphasized when it comes to penny stock investments is that they pose a considerably higher risk than regular stocks. Why is this so? First off, this is due to the lack of information available to the public. In order for any investment strategy to be a success, it is vital to have the necessary information on hand to be able to make an informed decision. Because companies listed on pink sheets are not required to register with the SEC, the stocks in that category are simply not as regulated as other stocks such as those represented on the New York Stock Exchange and the like.

Another risk that comes with penny stock investments is the lack of history on the companies that represent them. Often the case is that such companies have a poor track record or a non-existent one. Needless to say, this makes it extra difficult to determine whether or not a particular stock has any potential. The stocks in the category generally have a low-level of liquidity. This poses a risk in the sense that it will likely be more challenging to find a buyer for the stock. This might mean having to lower the price until the time when comes the stocks will be worth enough for you to raise the price. Low liquidity also provides room for some traders to manipulate stock prices to their advantage.

While penny stock investments are certainly a riskier investment than other types of stocks, there are definitely some credible companies out there that are working hard to give those stocks a good name. Any potential investor simply needs to understand the risks that come with the territory so that they are able to make good and sound judgments for their hard-earned cash.

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