Penny Stocks refer to the trades at a relatively low price and market capitalization, usually outside of the major market exchanges. The most popular definition is low-priced issues, often highly speculative, selling at less than $1 a share. In reality, some penny stocks have gone from 25 cents to $20.00, while others have become worthless. They have wonderful reward potential. Generally stocks are treated to be risky enough because of their lack of liquidity, large bid-spreads, small capitalization and limited following and disclosure. They will often trade over the counter through the OTCBB and pink sheets. Benefits The investor gets high returns over time. Stocks on average return about 10% a year, while other investments generally return at about 5-7%. If you hold a stock for more than a year, your profits (when you choose to sell your stock) are taxed at long-term capital gains rate of 15% instead of your standard tax rate. Money you make from interest in a savings account or CD is taxed at your regular tax rate, which can be as high as 35%. It is different from real estate as it is easy to expand your stocks. In fact, you can buy whole indexes of stocks, such as the S&P 500 or Wilshire 5000, by investing in ETFs that track those indexes. When you buy real estate, your returns are largely depend on the outcome of how popular that area becomes. If you buy a house in an area that goes downhill, you will lose a lot of money on that house. For stocks, you can own a stock that literally goes to zero, but it's not a big deal provided you invested in a wide range of stocks. Risks â€There are some of companies that are not required to file with the SEC. â€There is risk if you buy stock from a company about whose history and past record you are ignorant. For many investors, they want to invest in companies that have some kind of track record or can prove that they will make money. However, with penny stocks, you're usually dealing with companies that are fairly new or on the brink of ruin. â€If you decide to sell, it may be perhaps you won’t be able to find a buyer. â€The chance to lose a lot of money - especially if you've invested quite a bit of money in a particular stock. But then again, you could lose money with just about any stock!
Please Rate this Article 5 out of 54 out of 53 out of 52 out of 51 out of 5
Not yet Rated
