03 March 2013
Penny Stock Investment
I managed to invest some of my hard-earned money in IPOs or Initial Public Offering of multi-national corporations while I was young and sold all of them before I left the Philippines. I shelled out approximately $500 in one petroleum company and another $500 in one of the leading banks in the Philippines. I knew a trader who would constantly brief me of the comings and goings in the trading floor so as soon as I knew I was leaving the Philippines, I also got a call from my stock broker to sell both my stock investments. The timing could not be any better. I did not make a fortune but I managed to at least earn a decent out of the investments.
So, what is a stock, you might ask? In the corporate and business world, stock is the equity shares of the company's owners. Some of stocks are offered to the public as IPOs where common people like you and me can purchase a fraction of a company's stocks at a par value. A legal document called the stock certificate is issued to the investor indicating the type, value and the amount of the share bought.
There are many kinds of stock investment like income stock, common/preferred stock, blue chip stock, growth stock and penny stock. I will delve more on the latter as this is something the common people can afford.
Penny stock is a share of a company that trade at a very low price. Securities and Exchange Commission (SEC) in the US determines the penny stock as any stock selling below the $5 mark. In other countries, like in the UK, any share that is sold for a 1 GBP is in the penny stock category.
There is a caveat in dealing with penny stocks. Most investors consider it risky due to the fact that these stocks can be manipulated in the market by promoters and traders who uses the pump and dump scheme using newsletter releases, social media hypes and even chatrooms to promote the stock.
However, that is not always the case. A good investor and a keen trader can know the difference and can make wise judgment on investment by buying only known legit, small companies shares.