Monday, December 29, 2008

The double edge sword of penny stocks.

The penny stock can be your best friend, or your worst enemy, as a lot of us might know from experience. For those who aren't familiar with penny stocks they are a speculative security that will usually sell below $5, have a very low market cap and usually are traded on a OTC stock exchange like pink sheet or otcbb (although they can be on the major exchanges as well). Definitions vary on the exact definition of what a penny stock is or isn,t, but the guidelines above are a good guide for those that are just starting out. The main thing you need to know is that they are very speculative, and if you want to be involved with penny stocks you have to do your homework.

As a risk taker, and someone who dose his homework, my opinion of penny stocks is positive and they are worth the time. My philosophy on it is not necessarily get the next Home Depot or wal-mart, but to just to make modest gains with a volatile stock. With lower priced stocks, a little gain can get you quite a bit of profit, but i would never invest without obsessively researching a company first because that gain could just as easily be a loss. Penny Stocks are more of a gamble than what you see on the big exchanges, but with a bigger gamble can come more profit and that is what I'm looking for in a penny stock.