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What are Penny stocks?

Alexander Richards


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Hello, thank you for asking! 

Penny stocks refer to the stocks offered for less than $5 per share. They are usually not traded on large stock exchanges, but only on some medium and smaller platforms. Because of this, and their association with smaller companies, and low value, it is sometimes hard to find buyers for penny stocks, therefore low liquidity is the main attribute of Penny stocks. 

They are considered highly speculative so only investors with high-risk tolerance should be investing in them, as they can reap great profits, but can also generate high losses. There are several reasons for such high risk and low liquidity of penny stocks, these are lack of information available to the public, no minimum standards, lack of history, low liquidity, and a high number of frauds related to them.

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