Investing in Penny Stocks

There are a lot of people that invest in what are known as penny stocks and although 90% of them lose their money, of the remaining 10%, some even become known as penny stock millionaires because they do so well. Many professional investors refer to penny stocks as being very risky investments, perhaps even a gamble but they allow those people that do not have sufficient funds to invest in the larger stock markets like the NASDAQ and NYSE, to still try their hand at trading stocks. The Securities and Exchange Commission oversees the larger stock markets but as penny stocks usually have a value of under $5, they are not traded on the main stock markets and so do not fall under the watchful eye of the SEC. This is perhaps why many consider penny stock to be a gamble as, because they do not come under any SEC rulings, a company whose shares are for sale as penny stocks, does not have to divulge any information about itself. This is opposed to those companies whose shares are traded on the major stock markets who, as per SEC rulings, have to provide potential investors with at least a certain amount of information about them. This means that anyone investing in penny stocks may be doing so blind, investing in a company that they know nothing about and so yes, it could be considered a gamble. Gambling of any kind though, can provide winners and so it certainly is possible to make gains and sometimes large gains by investing in penny stocks. Although it does not take much capital to start trading penny stocks, as the investments are very risky, it is perhaps best if the investor can afford to lose the little they may start investing with. Many people that have heard about penny stocks ask how to buy penny stocks and although there are several ways, perhaps the best way is to find a stock broker that deals in penny stocks. Not all stock brokers will have anything to do with penny stocks but there are some that do and so trading with their help, at least to start with, is probably the best way to start. As mentioned, not all the 10% of penny stock investors that gain from their investments go on to become millionaires but many do gain enough to start trading on the larger stock markets where they hope that their luck in investing will continue.

Usually a company that has penny stocks available to trade, is one which is worth less than the large blue chip companies that trade their stocks on the NYSE or NASDAQ and are often worth less than $50 million. That does not mean though that these companies will not grow and if they do, a penny stock investor that has shares in them, will also see their investment grow. It has been said that the small companies of today, are the large corporations of tomorrow but whilst this may be true, not all the small companies will grow so big, if at all.