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Investing in Penny Stocks

Although investing in penny stocks has, by some, been likened more to gambling than investing, there are still many people that do invest in penny stocks. Penny stocks are in many ways the same as blue chip stocks in so far as they can just as easily fluctuate in value but as the penny stocks are shares with far less value to start with, although the percentage gains can be the same, the actual profits are still low. Penny stocks are shares in companies that are too small to be recognized by the main stock markets like the NYSE or NASDAQ, perhaps with a total value estimated to be less than $50 million. As these companies total worth is low, so are the price of its shares, sometimes only costing pennies a s opposed to dollars and hence the name penny stocks.

Some of these small companies, with time though, may grow into a big company and if as a penny stock investor you had shares in the small company, your shares will be worth far more as the company grew. Why some people refer to penny stocks as being a gamble rather than an investment is because unlike the larger companies that do trade on the larger stock markets, the small companies are not subject to the Securities and Exchange Commission (SEC) rulings. One of the most important rules that the SEC enforce is that before a company can trade its shares on one of their stock markets, it must give certain information about itself s that potential investors may know what they are investing in.

As the small companies do not have to do this and often don’t, a penny stock investor is often left to choose an investment whilst being ‘blind’ to what exactly the company does or is considering doing in the future. Penny stocks though do still appeal to many people and that is probably because, as the shares cost less, less capital is needed to start trading. Although some investors in penny stocks have been remarkably successful, becoming what are known as penny stock millionaires, far less are as fortunate as 90% of penny stock investors are thought to lose their investments with only 10% making any type of profit. Far less than 10% though go on to become millionaires.

You can learn more about penny stocks at moneysoldiers.com but often, because of the gamble involved in penny stock trading, many of those investors that do make a profit, switch to investing in the larger stock markets once they have gained enough profit to reasonably do so. Not all stock brokers will deal in penny stocks but there are some that do and so if you think you may be interested, you should perhaps ask around and find a suitable stock broker who may then be able to assist you in starting to trade these lower priced shares. If nothing else, trading in penny stocks may help you to one day invest in the larger stock markets.