The SEC defines penny stocks as “low-priced (below $5), speculative securities of very small companies. While penny stocks generally are quoted over-the-counter, such as on the OTCBB or in the Pink Sheets, they may also trade on securities exchanges, including foreign securities exchanges. In addition, penny stocks include the securities of certain private companies with no active trading market.”

By this definition, the financial sector stocks like Citibank and Bank of America, are penny stocks.

Last fall, the SEC took the unprecedented action of banning short sales and calling for a short cover on financial sector stocks that taken a beating by the shorts. It’s a lament that penny stock companies have been complaining of for years, but went unheeded.

And now these established, down-on-their-luck financial companies have convinced the American public that they are deserving of billions in taxpayer dollars because they are established companies and not traditional penny stocks as defined by the SEC.

So what have we really done for these behemoths? We’ve altered the definition of penny stocks to accommodate them. We’ve altered the level playing field by exempting them from short sellers. And now we’re giving them tax dollars like some government sponsored clinic while hard working entrepreneurs have to fight for their place in this shrinking economy.

Are these billion dollar bailout babies really that different from your traditionally defined penny stock?

Traditionally, risk characteristics attributed to penny stocks include:

1. Penny stock companies are usually start-ups that lack of information about the company, its history and its management. I would argue that financial sector companies suffer from the same lack of transparency. After all, how could anyone not see the leverage and the misguided asset classifications and still invest in these behemoths? The derivatives are way too complicated for the layman to analyze. So we rely on the banks to tell us the truth, while they have a conflict.

2. Large control blocks. Penny stock company founders traditionally have a large block of stock (albeit restricted) to ensure their interests are aligned with the rest of the shareholders while ensuring they cannot sell their shares for a quick profit at the detriment of other shareholders. In the financial sector, these large blocks are held by fund managers who similarly cannot sell their blocks quickly without lowering the market price and thereby impairing the return to themselves. What’s more, the CEO’s of the companies barely have any stock in their portfolios, eliminating the alignment with shareholder values. Instead, it’s become vogue to pay these CEO’s via stock options, giving them an incentive to show short term results and then cash out their options while the rest of the investing public holds shares that were sold by insiders.

This is done by using unwitting brokers, paid analysts and unquestioning media to tow the company line. And because the CEO’s and the companies have been held in high esteem, no one questions the use of these tools or their motives.

Penny stock companies often use similar tools. Only with a penny stock it’s called stock promotion. And penny stock companies have better motives: without stock promotion, the best company in the world won’t be worth anything because no one would have heard of it – and therefore the enterprise would be hard pressed to raise money for growth. Promotion should be a driving investment criterion for choosing a penny stock.

The issue with promotion is that the SEC often believes that stock promotion involving a penny stock needs more supervision than the promotion being conducted by billion dollar house hold names. Is there in fact an opportunity for fraud in the penny stock market? Of course there is.

But I contend that the risk is much higher with well established companies that have CEO’s holding stock options (big motive for early liquidation since options expire) rather than actual restricted stock (unsellable) for which they actually paid (as many penny stock companies experience). Empirical proof is offered by the billions lost in the financial sector right under the nose of, and with the blessing of the SEC and other regulatory bodies than has ever been lost on penny stocks.

3. Penny stocks are often accused of being used by scam artists who sell them through spam email or off-shore brokers. As the recent IRS/SEC probes have proven, many, many, many American CEO’s have offshore accounts making them no more honest or dishonest than the operators of penny stock companies.

Both traditional penny stock startups and the fallen as exemplified by the financial sector have the potential for growth and for fraud. Both are blighted by cash requirements, by short sellers and by image problems.

The difference is that the fallen companies have the government and SEC fighting for them while the typical startup penny stock company is vilified. The dichotomy is even more surprising when we stop to think that economists have long been telling us, and the American experience has long proved that the start-up is what drives the economy, diversifies the job base, creates the most jobs and is lean enough to take advantage of changing times.

So I ask you America: Are all Penny Stocks Created Equal?

http://www.pennystockjockey.com

We believe that investing in well chosen, well researched penny stocks provides a superior return to investing in mainstream equities. Our proprietary formula not only evaluates a company in the traditional sense, but also gives importance to the stock promoter promoting the company. We also always hire outside independent research in the form of a CFA report to ensure we’ve missed nothing.

Penny stocks offer the advantages of low price, high inside ownership, the absences of the ability to short and of derivative manipulations. In short, they are more transparent. The disadvantage of low visibility is over come by the choice of the right promoter. Our years of experience in this business has allowed us to identify good promoters from bad…in fact we make available a publication that shows anyone how to “Spot a Good Promoter”.

Author: Zach Soloman
Article Source: EzineArticles.com
Healing food: natural way to cure cancer

Companies that are usually listed on Pink Sheets are those who are just starting out and have not yet developed to meet the basic requirements needed to be publicly listed.

What are the advantages of investing in penny stocks?

The main advantage that an investor can get from penny stocks is its low price. You can buy thousands of penny stocks for a low amount. Also, Pink Sheets and OTCBB are very easy to get into as opposed to the regular stock exchange companies. Also, you may not know it, but it is possible that you are investing in the next big company which will bring you a substantial amount of financial wealth.

What are the disadvantages of investing in penny stocks?

The main disadvantage when it comes to investing in penny stocks comes from dealing with companies who are offering them. Pink Sheets only requires a company to have a broker in order to be publicly listed. No financial and incorporation papers are needed to prove the authenticity of the company. You will have no means of getting information about the company. You will have to research on your own and check out the background and financial standing of the company. Another disadvantage is that penny stocks entail a higher risk compared to other securities.

What are the warning signs of penny stock fraud?

Since Pink Sheets and trading Penny Stocks is very easy to get into, it can be a paradise for scammers. There are already many people who have fallen victim to penny stock fraud and as an investor; you must be able to know the different warning signs when it comes to penny stock fraud. Some of the warning signs that you have to be on the lookout for are unauthorized transactions and mismarked trade confirmations. Even if your stockbroker is handling all the transactions, you should also be aware of everything that is happening.

At the end of every transaction, your broker will provide you with a trade confirmation that will be the evidence for the transaction made. In this trade confirmation, you will find basic information like how many shares were brought for how much, the ask/bid price at the time of the transaction and other background information.

If you see that there are wrong information inputted in the trade confirmation, call the attention of your broker and have it changed immediately. Also, if you see transactions being made in your account without your knowledge, notify your broker. It may be an honest mistake, but it also can be a potential penny stock fraud in the making.

The best thing that you can do to combat penny stock fraud is to be well-informed and be vigilant when it comes to approaching penny stock trading.

My analogy refers to Penny Stocks traded on the pink sheet market. Penny stocks are cheap and some are not regulated or inspected at all. You feel good when you walk up to a roller coaster and you see an inspection sign posted, right? You know dangers still exists, but at least you have cut your risks down by knowing the ride get’s inspected. You know a policy and a procedure is in place that displays the safety and risks involved. So, you make a decision to get on a ride based on the information you’ve learned about it.

So what about penny stock rides? How do you know what regulations are in place for a penny stock? Is my penny stock inspected? How do you tell? It’s easy, they all have signs right in their symbol. Before investing or trading any penny stock, you want to know the risks and regulations that are behind it. You also want to know what kind of neighborhood it comes from. If you like the rough, tough and scary ‘hoods where there is very little police, then go with the suffix .PK symbols. The stock symbols are followed by .PK, which refers to the pink sheets. These penny stocks have very little to no regulation at all.

There are some that love these unregulated stocks. Why? Because the fact they are unregulated! They are open to manipulation by means of carrying a very low float. Buying a .PK stock is like waiting in line to get on the roller coaster and you can visually see the support structure is missing rivets and you say, “What’s the chances that support structure will fail when I’m up there”? “It’s a cheap ride and I want to take the risk”! You start riding that coaster up to the top, “oh crap the support structure is breaking”! You want out, but can’t! Or rather you can’t sell that stock because of liquidity issues! You painfully watch it get dumped and it all comes crumbling down. So, before you invest or trade, know what kind of ride you’re about to get on. Pay attention to the symbol suffix and know what risks you’re up against.

Don’t get me wrong, there are good .PK stock investments worth looking into, but at least you know what you’re starting out with. Next time you see a penny stock symbol, take notice of the suffix. One that offers a bit of regulation is the .OB, which trades on the OTCBB. However, all penny stocks are considered very risky and please consult with a professional before making any investment decision dealing with penny stocks. Its called doing your DD- “due diligence”. Penny stocks are considered speculation stocks.

Read more information about Penny Stocks at http://www.pennystocklist.com

Author: Gene Edwards
Article Source: EzineArticles.com
Awe Inspiring Pictures

You might have to do a bit more research to find the shares you want to invest in, but for many people this is worth it, so finding out details isn’t a big deal. If you have or find an agent, he or she will have loads of information to help you, plus you’ll get monthly details on how your stocks are performing, and you will be aware what the current position of your investment is.

In order to find out what shares are available to invest in, find or search the Over The Counter Bulletin Board (OTC BB) or Pink Sheets listings. This should help you find information not only on current stocks or shares, but other over-the-counter investments that you might want to make. It’s always a good idea to check your stocks with both the OTC BB and Pink Sheets.

Be sure you do your research. I can’t stress this enough. It may be a good idea to regularly check your stock sheets and watch the particular stocks you want to invest in before making any personal investments. This should give you some idea of how particular shares behave, and make you aware of what kind of return you may see with your own investment. It’s always a good idea to thoroughly look into stock (penny stocks or otherwise), before investing your money.

Once you know how to trade, there’s very little to block you from establishing your own personal investment fund in the shares of your choice. If you are inclined to do this type of trading, there’s no reason you should not give it a go because after all, ultimately it’s your money, and you are able to do anything with it that you desire.

To end, don’t forget that penny stocks carry bigger dangers and less liquidity, so prevent over exposure and invest only after inquiring. If you comply with these rules, and you are careful and fortunate, you could make a respectable profit from investing in penny stocks.

Buying cheap penny stocks: Five helpful hints.

1) Save up or borrow a start-up investment seed and determine your penny stock investment goals. Do you want a high-risk, high-reward investment, or would you rather go after slower and steadier profits? Try a little of each. Never put all of your eggs in one basket.

2) Research the penny stock investment markets that interest you. Learn all you can about commodities, mutual funds, stock market options and whatever other investments you want to add to your portfolio.

3) If you’re new to penny stock investing, try “pretending” to do some investing of your own. Give yourself a fictional amount of money (try to be modest and accurate), decide how you will invest it and watch how you would have made out in the “real world”. Learn from your mistakes. Adjust accordingly.

4) Start by playing small. Try going for modest investments and shooting for modest profits. Again, do not put all your eggs in one basket.

5) Diversify your portfolio, and know when it’s time leave an investment. Sometimes it’s best to cut your losses, other times it’s best to sell before the bubble bursts. Just because you’re investing in penny stocks doesn’t mean you shouldn’t take it seriously. Have a plan or strategy and work it. Remember, there’s always a learning curve.

Author: P.S. Prawfette
Article Source: EzineArticles.com
Provided by: Electric Pressure Cooker

Penny stock means a communication device between the risk and profit and we can say it is low-priced issues, often highly speculative, selling under one to five dollars and traded either on pink sheets (over the counter) or on the NASDAQ according to the United State definition.

This definition is very important for you to understand the penny stocks before you invest your money in it.

Can you find a way to know that your stocks go the right way is right for you?

Unfortunately, there is no sure fire way to make millions dollar by dollar as we said before. There is a risk when you investing in penny stocks and this risk may be a good thing or a bad thing.

People who invest their money in penny stocks have skills which make place them in the top of penny stocks. You can reach to them by some of these skills such as being patient, smart, investing less money in the beginning and getting a lot of information about penny stocks by choosing the best broker to be able to invest your money with less risk and making profit from it.

As we said before that if you have a little information, you will face a high risk and losing all your investments so you have a lot to gain by getting more information to make big bucks in penny stocks.

Time, information, willing, and the ability are necessarily to invest wisely in penny stocks. To be more efficiency, you have to get real time information and not enough actual information but accurate information and this can be easy if you choose the best broker.

Author: Giny Paul
Article Source: EzineArticles.com
Provided by: Beading Necklace