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The main difference between penny stocks and larger stocks is that penny stocks
fluctuate enormously on a daily basis. And therefore carries a greater risk than
your average large stock investment, however, with the potential to make a lot more
money. For example, if a stock only cost 10 cents, a 1 penny increase would push
a 10% gain.
Typically, these types of stocks are sold for $5 or less, in most cases they're
under a $1. Penny stocks are not found in the typical markets that most stocks in
your portfolio might be, such as NASDAQ, NYSE and AMEX. Penny stocks are a great
way of getting into the market at a low cost. And therefore, eliminates potential
loss risks. The logic behind trading penny stocks is that they're far less expensive
then their Blue Chip counter-parts.
Most penny stocks are shares of small companies that usually don't have great market
penetration. More often than not these companies are new or expanding their businesses
and this market is a great avenue for investors to get in on the ground floor.
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