The name "penny stocks" is actually a little misleading. Penny stocks can be found in companies that sell stocks for less than three dollars; however, the Securities and Exchange Commission has expanded the price of penny stocks to $5 and under. Companies that issue these stocks don't often have the financial standing to meet the requirements of a regular stock exchange listing but in most cases, these stocks yield positive and satisfying results.

Affordability

Many are attracted to penny stocks because they are affordable. These stocks are also attractive because they are an effective way to diversify your investments and they work especially well if you invest in a growing company. In addition, under certain circumstances, penny stocks have the potential for good profit. Even though these stocks are inexpensive, profits can be made, especially if your investment is with a small company. Another factor to consider with these stocks is that they are volatile. What this means is that there is a potential for profit but also a risk in losing money. Of course, this can be said for any kind of stock.

Penny Stocks: a Good Option for Investing

Also, it is important to note that The Securities and Exchange Commission regulate large companies and insist that they give upfront information to investors; however, small companies that promote penny stocks don't often have the financial information that an investor should have to analyze the financial strength of the companies. However, these stocks can still be a good option for investment because of their potential for growth. But before choosing a Penny stock, look carefully at a startup company that can give you the financial information you need to make an informed decision. The most important advice that one can receive applies to all investment. Do your research and use common sense when it comes to investing.