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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
Very cheap stocks, usually under $5. High risk, often from tiny companies.
Why It Matters
Penny stocks are the casino of the stock market. A $0.50 stock doubling sounds exciting, but most penny stocks go to zero. They're poorly regulated, easily manipulated, and favorite targets of 'pump and dump' schemes. The SEC warns that penny stocks are among the riskiest investments. For most people, they're gambling, not investing.
Key Points
- Many penny stocks trade on OTC (over-the-counter) markets with less oversight than NYSE/NASDAQ
- Be extremely skeptical of 'hot tips' or social media hype about penny stocks - often manipulation
- Amazon was once $5, but that's survivorship bias - for every Amazon, thousands of penny stocks went bust
Related Terms
Common Questions
Very cheap stocks, usually under $5. High risk, often from tiny companies. Penny stocks are the casino of the stock market. A $0.
Penny stocks are the casino of the stock market. A $0.50 stock doubling sounds exciting, but most penny stocks go to zero. They're poorly regulated, easily manipulated, and favorite targets of 'pump and dump' schemes. The SEC warns that penny stocks are among the riskiest investments. For most people, they're gambling, not investing.
Many penny stocks trade on OTC (over-the-counter) markets with less oversight than NYSE/NASDAQ
Be extremely skeptical of 'hot tips' or social media hype about penny stocks - often manipulation
Amazon was once $5, but that's survivorship bias - for every Amazon, thousands of penny stocks went bust