5 Things To Know About Penny Stocks

Outlook Money

Penny stocks are shares of small or newly formed companies that are listed publicly at comparatively lower market value. The following are 5 things to know about penny stocks

1. Low Share Price

Penny stocks refer to shares that have a price lower than Rs 10. This characterisation makes these stocks cheap to buy for most investors.

2. Low Liquidity

Penny stocks are generally traded very frequently; thus, it becomes harder to find buyers and sellers immediately, resulting in low liquidity.

3. Highly Volatile

Such stocks are highly volatile as they go through frequent price changes due to low liquidity and smaller market capitalisation.

4. Risk and Reward

In spite of being risky and having low liquidity, penny stocks can potentially provide higher returns than large and midcap stocks.

5. Transparency Issue

Investors might not be able to find a lot of information about penny stocks, making it difficult to assess their value and the risk involved in investing in them.

Compiled by Priyanka Debnath

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