Investing in Penny Stocks: Investing in the Small and Start-up Companies

2007-03-08 10:33:40

( Business )



OVER THE COUNTER STOCKS

Investing in penny stocks, as the name implies, does not require a huge outlay on your part. What it does call for is a healthy amount of daring, because investing in penny stocks is highly speculative and risky.

Penny stocks are not traded over the formal stock exchange market. Penny stocks are traded in what the industry refers to as over the counter transactions. They are similar to drugs that do not require any prescription and thus can be bought over the counter. Penny stocks are bought this way because their low value, often under a dollar per share, does not qualify them a space in the mainstream stock market.

Penny stocks usually come from small companies who want to generate more resources that they can use for possible expansion. Penny stocks may also be offered by start-ups who want more capital to fund their business as well.

FOR THE RISK TAKERS

People who invest in penny socks are just like venture capitalists looking for start-up companies that they can provide capital for. The only difference is that penny stock investing comes after the business has been created, while venture capitalists come before.

If you are the type of person who likes to take risks and can afford to do so, investing in penny stocks can be fun and lucrative as well. The highly speculative nature of this type of investment generates more excitement and a greater sense of achievement when your penny stocks earn.

There is also the satisfaction that you get knowing that you have helped a start-up get on its feet, or a small business to grow. Investing in penny stocks gives you the chance to help the little businesses who have no other means to generate capital. And that satisfaction is priceless and well worth the trade off.


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