Investing in Small Companies

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The share values of small companies are of course smaller than those of the larger companies who trade their shares on the large stock markets like NASDAQ and NYSE. The share values of the small companies are therefore considered too low to trade on the large stock markets and instead are referred to as penny stocks which trade separately. The price of these small shares vary from just a few pennies to $5 but their prices can be just as volatile and subject to fluctuation as the more costly shares on the stock markets. This means that by trading in these shares, buying cheap and selling when they go up in price, can make investors’ money. However, penny stocks are considered by most to be more of a risky investment than investing on the regular stock markets. The website by explains trading in penny stocks more fully but basically, as the penny stocks do not trade on the large stock markets, they do not come under the rulings of the Securities and Exchange Commission (SEC). One of the rulings that the SEC has is that any company trading their shares under their rulings must provide certain information for their potential investors to see but as the small companies have no need to do this, few do. This often means that investors in penny stocks know little about the company they are investing in and that, according to some people, is a gamble not an investment. It is possible though for people to make money on trading penny stocks and sometimes big money, as several penny stock millionaires will attest to however, in all, it is estimated that only 10% of penny stock investors make a profit from their investments, with the other 90% losing their money. Although this may seem bad, remembering that you can start investing in penny shares with just $50, many people consider the investments or gambles worth it. Although not all stockbrokers will deal in penny stocks, most will and so if you have $50 and want to start trading, consider trading penny stocks as if you want to invest in the large stock markets, you will need far more than just that $50, just to get started. Many of the penny stock investors would have preferred to of traded on the larger stock markets but did not have the funds to do so but, if they make money on their penny stock investments, they almost immediately switch to trading in larger stocks on the larger stock markets. As mentioned, penny stock investing is sometimes considered a gamble but as with many gambles, thinking of a strategy and sticking to that strategy can pay off and that is what the penny stock millionaires recommend however, in order for this to work, you must choose a winning strategy and that is something the penny stock millionaires may be a little more shy about revealing. As a penny stock investor though, it is possible for you to buy shares in a small company today and that company tomorrow grows into a huge corporation.