According to the Securities and Exchange Commission, penny stocks are actually a hypothetical security whose value is under $5 for each share and it is provided from a small company. All the stocks are covered in penny stocks whose shares are valued under $5 each and are traded OTC (Over the Counter), not in stock exchange. Though investing in penny stocks seems tempting at once, the penny stock is speculative by nature. It means your profit for one day may easily sweep away in the next morning due to rejection of new products by FDA. So, before getting started, be sure to know more in this penny stocks guide.
When it comes to invest in penny stocks, you should keep in mind the portfolio and recent past of company. If a company has a heavy portfolio in telecommunication or pharmaceutical industry, it is not wise to invest several stocks. Penny stocks can be used by the investors to expand portfolios in order to make profits faster and invest in long-term stocks to hedge their bets. When investors are asked by several market experts to monitor pattern of 12 months before investing in stocks, penny stocks are either well-established companies that have seen falls and hardships or beginners with having no robust reputations.
Major Outlets for Penny Stocks Trading
As investors can buy penny stocks out of stock exchanges, they should look for OTC listings to grab abstract chances. Over the Counter Bulletin Board is a best option to get quotes on penny stock on every minute and it has a translucent OTC stocks with which this medium can be separated from typical stock exchanges. OTC Bulletin Board acts as an intermediary among financial advisors, investors and companies listed. But it is an honest and reliable resource to find required information about penny stocks. It provides day-to-day OTC analysis and informational articles.
Penny Stocks – Regulations
Penny Stocks provided via OTC traders in the US are regulated by the SEC. The Securities and Exchange Commission works as a middleman among penny stock companies and investors with having insight upon the process of trading. To allow penny stock trading from several platforms, it is mandatory to submit per-month pricing analysis for the companies on values of penny stocks to the investors. Before completing each trade, the Securities and Exchange Commission needs investors to provide a contract deed to buy stock from a company. When the trading process is monitored by the SEC for penny stocks, the value of stocks and uniformity are not guaranteed.
An article published by Gary Weiss from Business Week in 1997 nicknamed penny stocks as “chop stocks”. It implied the significant rise for brokers from abstract investments of the clients. This “Chop Stock“ phenomenon was noted by Weiss was $10 billion business. Hence, investors are required to look at advice and tips related to penny stock investment. They should also ensure that their private data is secured and safe before transferring money digitally.