When you’ve ever experimenting with trading stocks and shares before, then you’ve probably received endless emails in your inbox, telling you about the next hot small-cap secret on the market. This could mean that you’ve started to explore the industry a little further, looking into penny stocks to buy, and whether they could potentially make you money. To truly get a feel for how valuable these securities can be, it’s important to get a deeper understanding of what low-cost shares actually are, and how they work. Just because they don’t necessarily cost a penny, doesn’t mean that penny stocks aren’t incredibly affordable.
These low-priced, small-cap securities are often delivered by small companies that have yet to build a prosperous corner for themselves in their target market. Contrary to their name, the SEC considers a penny share to be anything under $5. Buying low-cost stocks in any environment requires a very careful and strategic process. Penny stocks are often seen to be a lot more dangerous than their more expensive counterparts.
Additionally, there have been many low-cost securities associated with pump and dump or scam schemes in the past. Additionally, remember that you should never purchase a penny share just because someone else advises you to do so.