What exactly is Penny stock?
There are many definitions out there for what a dime stock actually is. The general definition accepted by the public and the SEC is stock priced below $ 5 per share. Usually dime stocks don’t have much history behind them and the company as a whole is priced at $ 4 million dollars or less.
Can you make money on penny stocks?
Many young companies start out as penny stocks and eventually climb out of penny stock status. Many other companies wait to go public until their stock is worth more than the penny stock range. The difference usually lies in the need for investment capital.
For example, if you are a young company worth $ .005 of stock now but need working capital to expand your business then you can go public with the hope of generating some additional capital. This can work pretty well for investors and companies if it’s a promising stock. Companies whose shares are penny stocks can be a risky investment.
Their stock value is usually a combination of real speculation and futuristic analysis, sometimes more speculation. Also, big companies will not always make big investments. Penny stock does serve a purpose and shouldn’t just be discounted as gambling. They serve to help reputable but financially needy companies develop and grow into companies large enough that they would not be otherwise without the help of investors. The best dime stocks also benefit wise investors looking for higher rates of return that usually can’t be found in other stock types.
Should I avoid penny stocks?
Of course you have to be on the lookout for those who are going to use the dime stock for other purposes, to take your money and run. The opportunities where fast money can be made will always attract a shady character. So study the ropes first and learn to recognize when someone is just trying to encourage you to buy stock so they can quickly sell and run for the money.
When looking for a good dime stock to invest in it is best to follow the leaders. Go to websites and forums where people stay on top of the next hot stock. Again beware of those trying to make money fast. After a while you will start to find out about legitimate stock recommendations when you look at them. A search phrase such as best penny stock or penny stock options on Google will bring up a number of resources to look at.