Penny Stocks, also known as juniors or micro-caps, are speculative investments that are highly volatile. This is what greatly differentiates them from blue chip stocks and mid-cap investments. Its volatility attracts investors to the junior markets. With the right penny stock picks comes the great possibility of increasing your asset value at a hundred times more than what one normally earns in larger markets. An added attraction to penny stocks is that this type of stocks can grow to become mid-stocks.
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Penny stocks are considered high-risk stocks if you aren?t too sure about where to invest or who to follow. As the description implies, investing in penny stocks are more risky than when investing in bonds or blue chip stocks. Gaining is quick but so is losing. But the rewards also far outweigh the risks once you have chosen the right stocks to invest in.
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Majority of the penny stocks are issued to raise money for explorative or development projects. These are mostly from resource or technology companies that have large debts but have very promising products that they are looking to capitalize on. The promise of success, big or small, on these endeavors is what causes the price of the shares to increase dramatically.
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Most investors stay away from promotional stocks. These types of stocks are generated in an attempt to drive the price of shares higher but it might or might not have actual value.
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In picking the right penny stock company to invest in, one can study the company?s technical analysis, fundamental strengths (earnings, assets, debts and other such details) and undervalued situations.
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Penny stock companies are notorious for stock swaps, consolidations and for changing names much more often other companies that trade publicly. During any such occurrence, your stock broker will automatically replace your stocks with the appropriate shares and you will be duly notified of such transaction.
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Delisting is very rare but can sometimes happen to penny stock companies. When this occurs, the company?s shares will no longer be traded publicly and the company enlists in another exchange or gets re-instated after a short time. If this does not happen investors stand to lose their total investment. However, these are highly unlikely events and there are ways to get protected as discussed in Modern Strategies Inc. publications. Be sure to follow our penny stock newsletter for the most up to date news!
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Source: http://www.pennystock-picks.com/blog/index.php/penny-stock-picks-investing/
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