Although many people may have heard of penny stocks, not so many really understand exactly what they are. So, what are penny stocks? A penny stock is a share in a company which does not have enough value to be considered large enough to have its shares traded on the large stock markets like the NYSE or NASDAQ. AS these small companies are probably valued at less than $50 million, each of their shares has a value of less than $5 perhaps even only pennies. These are though still shares in companies and so their values can fluctuate depending on how well or bad the company does. Investing in penny stocks has the same principle as trading in larger stocks; buy cheap and sell higher. Although the principle may be the same, penny stock trading is considered to be far more risky than trading on the larger markets and one of the reasons for this is that penny trading does not come under the control of the Securities and Exchange Commission (SEC).
Why this can make a difference is because companies trading their stock under the control of the SEC are required to give information about their company to potential investors. As the small companies do not come under Sec control, it is up to them as to whether or not they provide information about themselves to investors. This results in many penny stock investors investing in companies which they know nothing about and that, to some, is considered a gamble rather than an investment. As with other forms of gambling though, there are some people that win but in the case of gambling with penny stocks, only 10% of all penny stock investors are thought to win, or make a profit from their investment (wager). With 90% of penny stock investors losing their investments, anyone starting to trade in penny stocks should be prepared to lose their money.
Of the 105 that do make a profit from penny stock investing, some have even gone on to become penny stock millionaires and so there is money to be made in this type of investing, it is just that it is considered to be a high risk investment. The thing that is so appealing to many penny stock investors is though, the fact that they can start investing and trading with as little as just $50. Perhaps the best way to start investing in penny stocks is through a professional stock broker. It is not all stock brokers that will deal with penny stocks but there are some that will and so if you can find one of them, they will advise you as to go about your first investment. There are also many websites online that will give you details on how to start investing and where. As with most things today, there are even websites that offer advice as to which stocks to buy and which to sell but according to most of the penny stock millionaires, it is best to stick to just one strategy and hope that that works.