Penny Stocks
Penny stocks are any stocks that trade for less that $5 per share. Many of these stocks trade on the over-the-counter bulletin board. The over-the-counter bulletin board is not part of the NASDAQ, NYSE or any other major exchange.
The people who buy penny stocks tend to be either experts with decades of experience or beginners who have no clue what they are getting into.
Penny stock prices are often manipulated by criminals who pump and dump the shares.
It is important to understand that the CEO's and board of directors are trying to do the same thing as you are -- make money! They do so legally by paying themselves a healthy salary whether the company is a success or complete failure.
What are the average CEO salaries at various levels fo funding?
0 to $500,000 funded for company -- $35,529 / year CEO salary
$500,000 to 1 million funded for company -- $38,287 / year CEO salary
1 million to 5 million funded for company -- $45,755 / year CEO salary
5 million to 10 million funded for company -- $62,150 / year CEO salary
10 million and above funded for company -- $81,659 / year CEO salary
Penny stocks are extremely risky. A study found that during the 2000 to 2009 bear market, the average penny stock investor lost nearly half of their investment. During this same time period the S&P was flat. The chart below illustrate the varying returns.
FROM BAD TO WORSE
When we exclude the "penny stocks" that trade on major exchanges such as the NASDAQ and NYSE, about 90% of all over-the-counter stocks (AKA pink sheet stocks) eventually become worthless.
Never be fooled into believing that a company is traded on the NYSE or even traded the OTCBB simply because "share of stock" are offered. If you can't locate the company on the OTCBB or on Yahoo Finance then it's a private equity company. Avoid it!
NEXT ARTICLE: Ponzi schemes
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