What are Penny Stocks? Investing for Beginners Series #6 // What is a penny stock? david moadel
welcome to looking at the markets with David Modell this is another video in my
series investing for beginners and I'm going to tell you what a penny stock is
today I know that's a hot topic and just be
aware that you can email me at any time if you have questions or you want some
help with stocks investing putting together an investing plan because you
really need to have one if you're going to invest successfully you can email me
anytime my email address is right down there it's David Modell at gmail.com
alright so what is the penny stock well first of all the technical definition of
a penny stock according to the United States SEC which is the Securities and
Exchange Commission which oversees you know stocks and stock markets and things
like that the technical definition is any stock where the shares are less than
five dollars less than five dollars in price for the stock shares that would be
a penny stock and so they're not all trading for a penny all right they're
not all priced at one cent in fact they're not even all under a dollar you
know if a stock trades for $4.99 technically speaking that's a penny
stock because it's under five dollars per share and but some penny stocks are
a penny some of them are less than a penny a fraction of a penny believe it
or not I've seen stocks that trade for point zero zero one cents per share and
you know that's a that's fine I mean you know it could still be a good company
possibly and those are called sub penny stocks s-u-v sub penny stocks when they
trade for under a penny per share all right now just because a stock trades
for a very low price that doesn't mean necessarily that it's a bad company
doesn't mean it's a good company not necessarily just based on that all right
share price does not tell you everything you need to know about whether a stock
is good and whether the company that represents
the stock represents is any good so what you want to do is you want to research
every single company before you purchase it all right now penny stocks it's kind
of interesting because you'll hear about penny stocks in chat rooms newsletters
you know social media message boards places like that urging you to buy penny
stocks some things you need to be aware of although some penny stocks do trade
on a major exchange such as the Nasdaq all so many of them trade on smaller
exchanges over-the-counter exchanges Pink Sheets that kind of thing and those
are smaller exchanges and sometimes they may not have the oversight you know they
may not be monitored as closely and might not have the same safeguards for
consumers for you know investors that let's say the Nasdaq might have or some
other large exchange and so be aware of that and so caveat emptor right let the
buyer beware that really is the key phrase here and that's true for any
stock whether it's a large stock or a smaller company such as a penny stock
all right now sometimes the thinking of people who buy penny stocks will be this
sometimes they're thinking this it's easier for a stock that's maybe a penny
to double in price than a more expensive stock and that's the thinking and there
might be some logic to that possibly I mean it is more difficult for a stock
that's $100 per share to double and get to $200 a share that that would take a
lot for that to happen whereas for a stock to go from one penny to two
pennies you know that would be doubling and that mathematically might seem
easier and more likely to happen or you know for how about tripling for a $100
stock to get to 300 that would take a lot all right it would probably take a
long time in most cases for that to happen
whereas for a stock that's only a penny in price to get to three pennies that
would be tripling all right and so people sometimes will buy penny stocks
thinking oh I'm gonna get the next two bagger you know doubling in price or
three bag or tripling five bag or ten bag or whatever but as with any stock
dud I wouldn't recommend just buying a stock
just based on the fact that it's very low price and I wouldn't buy a stock
just because it's a high price or a medium price I would research the
company make sure it's a good company or better yet a great company at a
reasonable valuation reasonably priced considering how you know what their
profits are what their earnings are that kind of thing so do your due diligence
meaning do your research know what you own and that's always true at any price
don't buy anything based on just hype or because somebody told you to make your
own decisions be careful with all stocks and yep be cautious with what you invest
in all right so that's an introduction to penny stocks I hope this was helpful
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contact me with questions any time or if you just need some help my email address
is right there down below David Modell at gmail.com alright this is looking at
the markets thank you for watching and listening and I'll talk to you again
soon