Cheap Penny Stocks

Cheap penny stocks allow an investor to buy shares without having to invest a lot of money. For the person who does not know where to start there are many sites on the Internet that offer valuable information on investing in penny stock. The information may have to be purchased either by becoming a member or by purchasing the material outright. Membership into investing companies also include other perks such as recommended picks and other financial resources to help with making a wise decision on what companies are financially sound. In order to start trading a person will need to open an account with a brokerage firm. Opening an account with a broker can be done over the Internet. Buying shares in another company is a way to invest for the future in the hopes that the shares will be worth more than was paid for them. However, sometimes seeing a profit takes time and patience. Investing may be related to gambling and it can be addicting. Christians should use wisdom and be good stewards with what God has blessed them with and not be obsessed with getting rich. "For the love of money is the root of all evil: which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows" (I Timothy 6:10).

No individual should ever sink everything he or she has into one pot or one company. When a person invests in just one company there is a higher risk of losing everything. Risks exist with any type of stock investment so caution should be used when buying and selling shares. Some people like to purchase cheap penny stocks so their losses will not be as severe and the chances of making a profit might happen quicker. Some warning signs that more research is needed or caution is necessary might include signs that a company is restructuring or is laying off employees. Monitoring news throughout the day might help to provide some clues to opportune times to trade shares.

Stocks that are not listed on a major exchange and are under five dollars a share are called speculative securities or cheap penny stocks. Speculative securities are usually listed through a securities market known as Pink Sheets LLC. Companies that are not listed on a major stock exchange are not regulated by the Securities and Exchange Commission (SEC). This means that the companies do not have to prove financial health. Companies that list on the Pink Sheets are oftentimes smaller companies that do not want to have to worry about asset or revenue requirements set by the SEC. Most of these businesses do not use outside auditors to verify financial statements.

A company who is interested in going public may list on the Pink Sheets initially just to get the stock on the market. In this type of situation the risks of investing in penny stock is lower because the company is not in trouble and may have future plans to list on a major stock exchange once they can meet all of the regulations and stipulations. To go ahead and list on the Pink Sheets speeds up the process of them going public. Going public can provide a lot of benefits to a company who is trying to grow and expand. This allows companies to use public purchased stock as assets and other financing sources.

When choosing speculative securities doing some research into the company of choice will pay off. There are some well known companies who are financially stable that list on the Pink Sheets. Investors should still be very cautious about investing in penny stock even though they see reputable companies listing there. The best way to feel confident with using the Pink Sheets is by doing some research or using a brokerage firm who provides research for their members.The SEC was created to protect the investor and help to keep public companies honest. The creation of the SEC after the stock market crash of 1929 helped to restore the public's confidence in the market and helped the economy recover.

Requirements and regulations of the SEC help investors to make decisions based upon financial information that can, for the most part, be trustworthy. This is not available when purchasing cheap penny stocks. Companies listed on a major exchange must provide quarterly and annual forms, provide annual reports to all shareholders and file any mergers or acquisitions, among other things. Over-the-counter security market (OTC) and the Pink Sheet listings contain a very large venue of companies with billions of securities traded every year. Trading can be done over the Internet through a broker and many quotes are provided to members in real-time.

The Pink Sheets have four different categories to help investors to make wise choices on purchasing and trading shares. These categories are labeled as, current information, limited information, no information, and caveat emptor. Basically if a company has provided complete up to date financial information they are labeled as one with current information. One that has provided some information but is not complete is labeled as limited information. Then there is no information and caveat emptor. Companies labeled with the last two labels should be approached with caution or not at all. These categories help a person avoid some mistakes when investing in penny stock. Companies who are not willing to share their financial information publicly may not do so because they are not financially secure.