Beginning Investor Terms – Penny Stocks
Posted on | November 11, 2009 | No Comments
Penny Stock is a term I use a lot. But what does it really mean. Penny stocks are really any stock whose price per share is under a buck. I guess it should really be pennies stock, but who is going to argue for the collective intelligence of the average investing professional?
The traditional wisdom is that Penny stocks should be avoided at all costs. They are often volatile and illiquid, that is not traded in sufficient volume to enable easy entry into or out of a position in that equity. They are often not covered by analysts and may not provide any guidance on future earnings. They are often those things and more. The volatility I see as opportunity to buy in at a good value. Ditto with the no analyst coverage. Those are advantages for the small money investor. But. This is always the big but. You MUST do your own research. When you invest in Penny stocks , no one is going to do the research for you. But it is also an arena of opportunity and should not be shunned because it is one of the places that inefficiencies in share pricing can be huge. And if you are good at research and analysis, this is an area you can find your edge.
Tags: Investing terms > Penny Stocks
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