What are penny stocks? Do they really only cost a penny?

Question

I had heard of a guy who got rich on buying penny stocks. He was a janitor, so he didn't have much money. He'd spend a few dollars every so often and buy penny stocks. This evenually led him to acquire wealth

Answer 1

Penny stocks are just any stocks you can buy for a few cents. These stocks can be kind of risky because if a penny stock is running at $.05 and it closes the day at $.02, you're out over half your investment! If a $20.00 stock moves 3 cents, it isn't the end of the world.

Companies whose stock trades for pennies are usually very new companies, and as a rule of thumb, one in every 7 business ventures fail. I personally don't trade penny stocks for these reasons.

If you want to paper trade a few penny stocks, I'd try http://www.thestockster.com/wp/ . They sometimes show decent picks, but it seems like they're just trying to drive the market by over inflating these microcap companies.

Answer 2

Penny stocks are stocks in start up companies that aren't worth much yet, usually just a few cents per share. If the company grows and the stocks go way up, they can make you rich BUT the majority of new companies go belly up within the first five years. Don't invest more in penny stocks than you can afford to lose.

Answer 3

Two things to remember when looking at penny stocks:

Just because a stock has a low share price doesn't necessarily mean that it's cheap. Remember when you invest you're paying money for something that will produce cash for you-- you want to buy a stock that will produce a lot of cash for you in relation to its share price, or is likely to do so in the future. Stare at the P/E ratio, not the price per share and try to evaluate the company's business prospects.

Most companies try to keep their stocks above $5/shr because most mutual funds are forbidden from investing in cheap stocks. For that reason something is likely to have gone very wrong with companies that trade at low prices. You may be able to find good investments here but tread very carefully.

Answer 4

The term "penny stock" generally refers to any stock that trades for less than $5.00 per share.

Some stocks trade for much less than a penny per share.

Penny stocks are an extremely risky proposition. The vast majority of them eventually go worthless. If someone actually acquired wealth investing in penny stocks he was the rare exception.

Answer 5

Penny stocks are stocks that fall under a certain dollar amount, I think it may be one dollar or something like that, point is that they are very cheap and very risker and alot of people lose with them because you get what you pay for.

Answer 6

Hi, i know what your question means. i also think stock market is a nice place for investing.

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Best Wishes && Good Luck!