What is Penny Stock?


Author: Michael Raitora

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Keywords: penny stock, stock market

Stocks selling at a very low price are called "penny stocks", eventhough there is no universally agreed upon price below which a stock must sell in order to qualify as a penny stock. Some individualls consider that only stocks trading for under a dollar a share should qualify as a penny stock. Other investors classify all stocks trading for less than $5 per share as penny stocks.

There is an agreement that a stock must sell at a relatively low price to qualify as a penny stock; it's just that no unanimous agreement exists on exactly how low. Penny stocks are generally considered very risky investments, with prices that are sometimes subject to being manipulated both by the dealers who serve as market makers and by individual investors who attempt to profit from price movements. When considering the purchase of low-priced stocks, it is indeed buyer beware.