Penny Stocks Information

 Penny Stocks And SEC Regulations

Penny stocks are stocks that have low value and they are commonly sold outside the stock exchanges. All stocks which are sold on the stock exchanges have to meet some regulations. The penny stocks are usually sold over the counter and have high risk. But, if you are a beginner in the capital market it will be easier for you to start with penny stocks because of their small value although the risk of losing the money is higher than investing in stocks which are sold on the stock exchanges such as NYSE and NASDAQ.

All trading of stocks on the stock exchange is monitored by SEC (Securities and Exchange Commission) and this commission has the task to protect the interest of all people involved in trading. Securities and Exchange Commission frames rules and guidelines for the proper functioning of stock exchanges. SEC has a role in facilitating the capital formation on the market and also takes oversight of fair trading.

Penny stocks are not approved nor disapproved by SEC. There is nothing illegal in trading with penny stocks, but the trade of penny stocks is outside of the NYSE, NASDAQ or any other stock exchange in the US. The penny stocks are traded over the counter and out of regulations of SEC.

However, the Securities and Exchange Commission tries to control the trading with penny stocks.  How does the SEC control the trading of penny stocks if they are not sold on stock exchanges? The broker or dealer hired by the person or company who wants to sell penny stocks will confirm that his client is to sell them. Before the transaction, the broker should have this written request from his client.

The broker should also give a document to the client in which it is stated the desire of his client to buy penny stocks from a company. In this document, it should be stated the risk the client is taking when investing in penny stocks. Also, SEC rules that the broker is obligated to inform the buyer of penny stocks about the commission he will be charged. The client furthermore will be informed of the market rate of penny stocks and variations in price during the time.

At the end of every month, as SEC rules, the broker is obligated to give to its client a monthly statement with market rates of the stocks he has bought. The brokers find it mandatory to follow the rules of SEC otherwise they will be punished. By enforcing these regulations, the SEC is able to be controlling the penny stocks market and trading. In this way, the risk for buyers of penny stocks is somewhat lower and this is the reason for the involvement of the SEC; to make penny stock trading as safe as possible.

 

Was Digg almost a penny stock company?

If Digg would have been a penny stock company would you have invested?

Penny stock investments are interesting investment decisions. The gain and loss can be spectacular but overall there is a higher chance of losing money. Many people become millionaires after becoming penny stock traders, but most of them actually know about the increase of prices at a particular time. You can begin your penny stock trading, but make sure that you learn about these stocks very well before making the investment. One wrong move can lead towards loss of your hard earned money and make you feel negative about stock investments.

Now that we have gotten that out of the way time to answer the question what would have happened if Digg ended up being a penny stock?

It would have been one of the few home runs when it comes to penny stocks. Digg started small but ended up huge!

Penny stocks are micro-cap stocks having per stock value of $5 or less. These stocks have a low market capitalization of companies, which means that the total assets and liquid money with the company are lesser. Mostly, the beginner companies in any niche are associated with penny stocks. These tiny stocks have high volatility and low potential. It is integral for the investors to make choice for the perfect stocks having a real background. Penny stocks are risky and choosing them is quite difficult for the investors. You must learn the right ways to trade them. Read more about choosing the right stocks at Penny Stocks.

Make the portion of your investment dedicated to micro-cap stocks and don’t go beyond it. You might be tempted to do more of investments to make simple money, but it won’t work till you buy the right stocks in your investment. If micro-cap stocks can produce great gains, it can make you bear huge losses too. Understand the reality that penny stocks can’t make you millionaire as these involve high risks and returns on investment are not wonderful. You can take these stocks in different portions and not involve too much money into one stock as the probability of losing increases with this strategy. The potential gains can be more, but becoming greedy can ruin all your money and make your penny less.