Online penny stocks are traditionally regarded as possibly risky investments, though they have attracted a number of investors over the years. Because...
Online penny stocks are traditionally regarded as possibly risky investments, though they have attracted a number of investors over the years. Because of the way online penny stocks are traded and because they face fewer regulations than traditional stock investments, they should be handled with care. Nonetheless, if you keep a cool head on your shoulders and understand the basics of the way in which the online penny stock market works, then it is possible to make the right investment decisions for you portfolio.
Online penny stocks are not traded on the traditional security exchanges. These stocks are typically issued by companies that are too small or have too few assets to meet the requirements necessary to list their public stocks on the larger exchanges. Thus, these stocks are often listed on the Over-the-Counter Bulletin Boards (OTCBB) or the Pink Sheets. These electronic quotation systems operate by a different set of guidelines than the major exchanges, and because of this, investing in online penny stocks can have higher risks.
Because the regulations that govern the OTCBB and Pink Sheets are less formal than the ones in the larger exchanges, investors must be cautious when dealing with online penny stocks. These stocks can also be referred to as micro cap stocks, cent stocks, and bulletin board stocks. These stocks can be subject to price manipulation due to the lack of official public information available. Fraudsters can manipulate message boards, emails and cold calls to create unwarranted hype about online penny stocks which can be easy to believe, causing investors to jump aboard.
Before buying any online penny stocks, prudent investors will first start looking for information about the company. If general financial information is not available through the usual sources, then it might be a good idea to get more creative in conducting research. It is a good idea to look up news articles, financial documents, television reports, and interviews pertaining to the company. In the meantime, it can also be a good idea to keep your eye on message boards and any alerts about online penny stocks. As you continue gathering the necessary facts, you will start to get a feel for the company, which may be able to help you decide whether or not invest. It is smart to also consult with a financial advisor about online penny stocks before buying, in addition to the necessary due diligence.
The process of conducting background research is the responsibility of all investors. If you have received tips about online penny stocks, you should research them before you purchase.
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