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Penny Stock Investing

Posted on February 27, 2021 by Todd Marvel

Stocks are usually categorized in accordance with their market capitalization and price value by the marketplace players. Accordingly, we hear terms like large cap stocks, medium cap stocks and small cap stocks. Shares with really small market cap (around $100 million) and a maximum price value as high as $ 3 are called very cheap stocks on the market jargon. They are usually cited because the opposite of blue chip shares, which frequently carry reduced tag. Very cheap stocks are often traded over-the-counter (OTC) by the brokers because they're struggling to list on exchanges because of their stringent norms.

For a very important factor, big exchanges just like the New York STOCK MARKET (NYSE) and NASDAQ prefer top-of-the - line companies for listing. Way more since they too are keen to prey on reputation of the firms they trade in only because the latter desire to profit from huge turnover volumes of the exchanges. Second, in addition they strictly enforce compliance of these norms by the listed companies, and therefore those who neglect to achieve this are automatically de-listed. Such exchanges have a tendency to evaluate performance record and caliber of top management of the business deciding on list using them.

In contrast, very cheap stocks are mainly unlisted and traded outside exchanges. Put simply, they're nondescript stocks with listless trading. Very cheap stocks mostly change hands between brokers, without getting much notice from common investors. It is because this group of stocks is meant to be risky because of insufficient key info on the concerned companies, their promoters and management. Perhaps this is why why these stocks are frequently targeted by investment scammers.

Nevertheless, very cheap stocks can also submit unexpectedly big returns should they rise on the basics of the concerned company instead of any market manipulation. The reason being the majority of the penny stocks are usually quite undervalued because of insufficient market support. So, anyone who is able to lay his practical the right very cheap stocks might reap unexpected gains some day.