Low-Priced Stocks Can Spell Big Problems
Are you considering investing in low-priced securities? You might have heard that they're a good way to make a profit without spending much. But how much do you know about these securities?
Low-priced securities are often known as "microcap stocks" or "penny stocks." Generally, microcap stocks are stocks issued by companies with market capitalization of less than $250 million to $300 million. Penny stocks are typically stocks issued by very small companies that trade at less than $5 per share. While the two categories overlap, not all penny stocks are microcap stocks.
Many low-priced securities trade in the over-the-counter (OTC) market rather than on an exchange such as the New York Stock Exchange or Nasdaq. This means they aren't required to meet the listing standards imposed by exchanges, such as a minimum total market value or number of shareholders. While these securities can be legitimate investments, they're also high-risk, so approach them with caution.
Source Fool.com
