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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
Penny stocks refer to shares that have a price lower than Rs 10. This characterisation makes these stocks cheap to buy for most investors.
Penny stocks are generally traded very frequently; thus, it becomes harder to find buyers and sellers immediately, resulting in low liquidity.
Such stocks are highly volatile as they go through frequent price changes due to low liquidity and smaller market capitalisation.
In spite of being risky and having low liquidity, penny stocks can potentially provide higher returns than large and midcap stocks.
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