Why Its A good Idea To Avoid Most Stocks That Trade Below 1 Dollar
I really want to make this clear to everyone reading this blog. Always keep in mind the lower the price of the stock the higher the risk. I cannot stress this anymore. I know it sounds a little strange when you think of the term penny stock you think of a stock trading for ten cents twentyfive cents a share. But the broad definition of the term penny stock can include any stock trading below 5 dollars a share. I know that I have been referring to penny stocks as stocks trading below 1 dollar and low single digit stocks as stocks that trade between 1 dollar and 5 just to avoid any confusion. Most of the low single digit stocks worth buying trade on nasdaq or the new york stock exchange and they trade above 1 dollar all stocks listed on the new york stock exchange must maintain a share price of at least 1 dollar otherwise they will be delisted Once in a very great while some sub 1 dollar stock will be a attractive investment even if the stock trades on the pink sheets or the over the counter bulletin board. But very seldom. Generally speaking the vast majority of attractive stocks trade over 1 dollar. Again. because I do not want to rule out all stocks trading below 1 dollar. I will say it again once in a very great while theirs an exception to the rule a stock that trades below 1 dollar could be an attractive investment even if it trades on the pink sheets or the over the counter bulletin board. I do not want to scare anyone Its just that so many of these sub 1 dollar stocks are of such poor quality it takes a real pro to spot a junk stock from a diamond in the ruff. Many of these sub 1 dollar stocks that trade on the pink sheets or the over the counter bulletin board do not have financial statements that are up to date unlike most stocks trading on nasdaq or the new york stock exchange. These pink sheet stocks or the over the counter bulletin board stocks can easily be manipulated. This is great territory for fraudsters pump and dumpsters unscrupulous stock promoters scam artists and the like these markets are not regulated like the nasdaq or the new york stock exchange. Remember most of the quality sub 5 dollar stocks trade between 1 dollar and 5 on nasdaq or the new york stock exchange. So many of the really spectacular performers over the years have been stocks that traded between 1 dollar and 5 dollars a few examples apple yes apple traded at just 3.60 back in 1998 petsmart traded for just 2 dollars in 2000 and netflix traded for 4.00 in 2002 believe it or not today netflix is a 400 dollar stock apple was around 500 just a few months ago before the company split its stock five for one I think it was and petsmart trades for 72 or so. You will always find more great investment candidates between 1 dollar and 5 than under 1 dollar.