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==== ====2 Free Penny Stock Picks please click below<a href="http://758b0bjqf5wafy0dg1j6p68vak.hop.clickbank.net/" target="_top">Click Here!</a>==== ====The definition of penny stocks, also known as micro-cap stocks, varies. A stock is termed as apenny stock based upon its market capitalization and share price. According to the US Securitiesand Exchange Commission (SEC), a stock is termed as penny stock if its share price is below $5.However, many in the investor community believe that a penny stock is one with the share price of$1 or less. As junk bonds are compared to investment grade bonds in fixed income market, pennystocks are compared with blue chip stocks in stock markets. Trading in penny stocks are far moreriskier and speculative than trading in blue-chip or other mid-cap or large-cap stocks. Severalinvestors believe that investing in penny stocks is like gambling, that one has to be prepared forlosing money. Moreover trading penny stocks can be more expensive. Penny stocks are usuallytraded in the Over-the-Counter exchange or on the pink sheets.If you intend to invest in penny stocks you should know the differences between penny stocks andother stocks, such as blue chips and mid-caps. While the performance of mid-cap and large-capstocks is driven primarily by fundamentals, several analysts believe that the performance of pennystocks is driven primarily by investor speculations. If you analyze the fundamentals of 100 pennystocks, perhaps only two or three would be generating superior returns.Despite the issues associated with penny stocks, several investors intend to invest in pennystocks, since they believe many of todays blue-chip stocks, such as, Microsoft (Nasdaq: MSFT)and Wal Mart (NYSE: WMT) were once penny stocks. However, the share prices of thesecompanies were almost never trading for pennies, however it appears that way when one looks atthe price adjusted for stock splits. Many investors ignore this fact.Since many penny stocks are traded on the pink sheets and are not scrutinized by the SEC, youwill find it more difficult to find credible information about them.Penny stocks often lack liquidity, which means investors would find it difficult to buy or sell. A lackof liquidity often helps fraudulent investors to manipulate the share prices. The SEC itself inSchedule 15G states "Investors in penny stock should be prepared for the possibility that they maylose their whole investment".A penny stock traded on the over-the-counter exchange has a higher chance of being delisted forlack of compliance. If the particular company is unable to list its stock on another exchange orbecome re-instated, you may lose 100% of your investment. You should consider this seriously, ifyou intend to take long positions in a penny stock.Several new investors are attracted to penny stocks, given their low price and potential forsubstantial gains. There have been instances where penny stocks rose more than 1000% in a fewdays in the past, but this is extremely rare and often the price is not sustained. There are historical
evidences that most penny stocks lose their entire value. If you are a new investor, you need to beaware of the risks involved.If you still want to invest in penny stocks, do the relevant research into the companysfundamentals and ignore the pre-conceived theories about the successes of the penny stocks inthe past.Joel Arberman is the Managing Member of Stock Aware, LLC. We publish a free investmentresearch and analysis newsletter and offer investor relations and investor awareness services.Learn more at StockAware.comArticle Source:http://EzineArticles.com/?expert=Joel_Arberman==== ====2 Free Penny Stock Picks please click below<a href="http://758b0bjqf5wafy0dg1j6p68vak.hop.clickbank.net/" target="_top">Click Here!</a>==== ====