Investment if fraught with difficulty. How can something that seems easy (spending money) be so hard? The reason that there are roadblocks to investing is to make sure that the investor is safe, and the individual selling the investment has scruples. When it comes to stock there is an entire governmental body that is tasked with the proper exercise of the sale and purchase of stock. It is the Securities and Exchange Commission (SEC.) The SEC makes sure that rules governing the safe exchange of stocks are followed. Certain types of stocks are harder to govern though. Penny Stocks are those, which sell for under $5 per share on the exchange and are small company stocks. They are easy to purchase, but they can be hard to sell.
They are easy to purchase because there are a lot of them out there. The abundance of Penny Stocks makes it easy to find an investment. These stocks seem to grow on trees. There are many small companies who need the outside investment, but cannot afford the stricture of the large exchanges (NYSE and NASDAQ.) Therefore, they trade their company on either the Over the Counter Bulletin Board (OTCBB) or the Pink Sheets. These two exchanges were specifically designed to assist smaller companies with the exchange of their stock. The boards make these micro caps easy to attain and trade. There are also brokers that deal specifically with Penny Stocks and can help the average investor purchase them.
One of the major drawbacks of Penny Stocks is that they can be difficult to unload if you are losing money. Blue chip stock is easy to buy and sell because the companies are usually large and solid. However, many of the stocks sold on the smaller exchanges are from unproven companies that cannot necessarily guarantee any growth. Therefore, when it comes time to get rid of the stock because it is a poor performer, there may not be any buyers. In addition, if someone does decide that they want your stock they may demand that you sell for a lot less than you paid for it. This is one of the cautions that are inherent in the purchase and sale of these stocks.
It is important that you purchase from a reputable seller. Look for testimonials. Ask someone you trust whether they have used a particular company and how did they like them. Follow watch lists. There are certain brokerage companies and traded companies that are listed by the SEC because they have been complicit in some shady dealings. Also, make sure that you follow the SEC guidelines for the purchase and sale of stock.
Penny Stocks can be a great investment, but they can also lead to bankruptcy. It is important that you make sure and only buy from reputable sellers. Do not follow the email spam sites. Use only those that are highly rated and have proven their ability to make sure their customers are well taken care of.
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