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Stocks Penny stocks can make you a ton of cash. But they can also lose you a fortune. Have you got the belly to take a position in these tiny priced stocks? Consider these contributors.

Straight off what is a penny stock? The most generally accepted definition of a penny stock is a stock that constantly trades for less than $5 a share. While most penny stocks are associated with the OTC traded “Pink Sheet” instruments, penny stocks can be discovered on the NYSE and the NDX .

1. How far are you from retirement?

If you’re less than ten years from retirement, then you shouldn’t be making an investment in penny stocks. Penny stocks are rather more like a bet than an investment. And if you do make a decision to invest in a penny stock, it should be with money that you don’t need for retirement. Consider it your “Vegas money.”

2. Do you not like volatility?

If you really do not like to watch the swings and roundabouts of the market, then a penny stock is not best for you. Some penny stocks can double and lose eighty percent of their worth in the same week. That’s because penny stocks are the most hyped of all stocks on the market. A mention in a stock newsletter alone can make a penny stock double. That suggests that these stocks are moving without any real elemental motive.

3. Do you under stock financials?

If you don’t understand p / e proportions or net profit vs gross profit, then you shouldn’t be making an investment in penny stocks. That’s because there are lots of penny stocks have extraordinarily infirm balance sheets. Unlike stocks in the DJX thirty or the SP five hundred, penny stocks are sometimes made of little corporations with extremely murky finance statements. If you are unable to know how a penny stock company earns cash, then you’ll have much difficulty earning a profit.

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