Ever heard of the phrase, “never judge the book by its cover”? Well, the same goes for investing in stocks, especially penny stocks. Recently, I read an article on fifthperson regarding the dangers of penny stocks. While I do agree with their points brought up, however, I feel that there is this stigma attached to the term “penny stock” especially how they associate it with speculation. Every time I bring up buying penny stocks to more seasoned investors, their initial response would always be how risky it is.
In SEC terms, any stock that has a value of less than 5 dollars per share and also which is not exchanged on the major exchanges (like NYSE or NASDAQ) is called a penny stock. These types of stocks are traded over the counter and they are listed in exchange boards such as Pink Sheets or in the OTCBB. In the context ......