The Stock Stethoscope

Penny stocks are called penny stocks for a reason.

The term “penny stocks” likely comes for the fact that these stocks are often priced at less than a dollar or just a few cents, which would make them cost just a penny or a few pennies per share. However, it is important to note that the term “penny stocks” can also refer to stocks that are priced above a dollar but are still relatively low-priced and speculative in nature.

Penny stocks are stocks of small companies with low market capitalization that trade at a low price, often considered below $5 per share. These stocks are generally considered to be highly speculative investments because they can be highly volatile and have limited liquidity.

While penny stocks can offer the potential for large returns, they can also be risky investments. These companies are often thinly traded, meaning that there may not be a lot of buyers or sellers in the market, which can make it difficult to buy or sell shares. In addition, the companies behind penny stocks are often new and unproven, making them more vulnerable to market volatility and other risks.

It’s important to note that investing in penny stocks should be approached with caution, and it’s generally not recommended for inexperienced investors. It’s also a good idea to conduct thorough research on the company and its financials before investing in any penny stock.