The term penny stocks, also called small cap stocks, micro-cap stocks, or nano-cap stocks is most commonly used for stocks that are priced for less than a dollar a share and for small companies. Most penny stocks trade over the counter (OTC) and are quoted in over the counter bulletin board (OTCBB) or the pink sheets quotation service.
Because many penny stocks aren’t covered by analysts or research firms, it is imperative that penny stock investors conduct their own due diligence on a company before investing. Some of the most important elements to consider are a company’s filings with the U.S. Securities and Exchange Commission, trading history, and fundamentals.
Keep in mind that if you choose to invest in the penny stock market, there are risks. You must be prepared to lose your entire investment. But, with great risk there is also a chance for great reward.