Understanding the Penny Stock
Before you can begin investing in penny stocks, you do need to
take the time
necessary to find the right knowledge base for the process. That
need to understand what the penny stock is as well as how you
can invest in
What Is A Penny Stock?
The first order of business here is to define just what the
term; “penny stock” refers to. The bad news is that there are
many mixed definitions out there regarding what this type of
stock actually is. Therefore, you need to understand what things
are considered to be penny stocks and then how to determine what
the stock really is.
For example, a penny stock is a common term used to describe
a stock that is inexpensive to purchase per share. This could
mean: • A stock that is priced under one dollar per share
• A stock that is priced under five dollars per share
• A stock that is traded on what is called pink sheets
• Any over the counter, or OTC, type of stock
The United States Securities Division says that a penny stock is
one that is valued under the value of five dollars and is traded
either on pink sheets (over the counter) or on the NASDAQ.
What you should know is that a company that trades with penny
stocks is a
company that has a value that is quite low in comparison to
companies. It should have a net worth that is four million
dollars or less in
net tangible assets.
In other words, companies that are valued higher than this
that have more inventories, for example, are those that
regularly trade on
the stock market. Those companies often have a good amount of
being up and running.
In addition, they usually have what is called heavy assets. This
the company has a good amount of real business as well as solid
and a good amount of inventory. They are usually set in what
is as well.
You will find that these companies are those that have fewer
sales, and are more commonly unknown than those companies that
traded on the stock market regularly. Of course, that’s why they
penny stocks. In addition, these companies generally do not
carry a large
amount of business from one quarter to the next. They may not
defined goals or a solid business inventory as of yet.
One thing that makes penny stocks so, well, frustrating to learn
about is that
they are often called by various different names. You may have
referred to as micro stock, nano stock, micro cap stock, small
cap stocks and
many other names. If that sounds confusing, just remember that
generally all terms that rely simply on the fact that the stock
is priced below
a dollar to five dollar range. In other words, penny stocks are
affordable, low costing stocks.
Where They Trade?