What are penny stocks? Definition, risks and how to invest

  • Penny stocks are securities that trade at less than $5 per share, often in unsupervised over-the-counter markets.
  • Penny stocks are considered lucrative but high-risk investments: volatile, illiquid, and often subject to scams.
  • Investors interested in penny stocks should deal with those listed on larger exchanges and sold by established brokers.
  • Visit Insider’s Investing Reference library for more stories.

Penny stocks have become more popular than ever, tempting investors with a low cost of entry and the prospect of significant financial gains. Stories of shares making gains of over 4,000% in just months add to their appeal, and new trading technology makes it easier than ever to enter the market.

But while they can be lucrative, penny stocks come with significant risk. Potential investors should be careful to understand what they’re getting into.

What are penny stocks?

Penny stocks refer to company stocks that cost, if not merely a penny,

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