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Fact or Myth: Making Millions By Investing a Penny
We’ve all heard stories of people investing very little, yet yielding big returns. Is this true? Well, maybe… but first, let’s talk about penny stocks.
Penny stocks are stocks that trade for less than $5 for a share but are considered some of the riskiest investments around.
They have a high promise of gains and attract investors towards their cheap prices. For many investors, they are not a good choice but if you’re a risk taker and you want to take a chance to receive a high reward, penny stocks may be for you.
Penny stocks are sometimes called “over the counter” (OTC) stocks (though some do trade on stock exchanges) or referred to by the size of the capitalization of the companies that issue them: “small-cap,” “micro-cap” or “nano-cap” stocks.”
However, if any stock is less than $5 per share, it’s considered a penny stock. The reason they are worth so little is that stocks are listed by companies that are brand new or have a little financial history.
Usually, investors choose stocks with companies who have a long-term steady flow of growth so with little financial history there is no clear idea of where the company is headed making it a risky investment.