Are you having a hard time figuring out the answer? It’s simple really. The main difference between the two is that penny stocks are much cheaper than big stocks. Many people invest in stock but only a few of them end up winning money. They don’t understand fully the difference between the two so below will be some the aspects you should keep in mind.
Know your Budget
If you want to achieve maximum profits with minimum investments, then penny stocks is perfect for you as you will be able to invest in a larger number of stocks. The possibility still exists that you will be able to earn large profits even though you are investing less. Penny stock is also the ideal choice for many small investors as it tends to be very affordable (between a few cents to 5 dollars).
The key to being successful with penny stocks is to research the small chip companies that are growing or expanding so as to invest wisely because penny stock companies are not very popular. Big stock companies, on the other hand, become very popular when they are profitable so you will more than likely see them in the news. Unfortunately in penny stocks this is not so. You must also exercise extreme caution when investing in penny stocks as it is possible to lose a large sum of money if you are not careful.
Unfortunately no legitimate information is made readily available about penny stocks. It is therefore vital that you create your own knowledgebase by researching your market so as to not be manipulated while investing. Indices such as NASDAQ will list popular big stock company shares but this is extremely rare for penny stock companies. Due to this, more information is made available for investors who risk to ‘do it themselves’ or for trade driven purposes.
Know When to Trade
Trading is not illegal when investing in penny stocks. However, it is never done over the counter. In penny stocks, share prices are not featured on indices such as AMEX, NYSE or NASDAQ so it is advised to become a member of other alert services so as to receive your alerts about penny stocks.
What is required to Remain Legal?
If you know within yourself that you do not understand the market and you are a cautious investor, then it would be best for you to keep away from penny stocks. Why, you may ask? It is recommended that you invest in big stocks because there are more information resources available to you than with penny stock companies. In fact, the penny stocks can only be featured on NASDAQ if their issuing company meets the index statutory requirements which are hardly ever met as it is not a legal requirement of the OTCBB for penny stock companies.
Similarities and Differences
- Big Stock Companies vs. Penny Stock Companies – Companies with little reputed operating history generally issue penny stocks while companies with excellent operating history issue big stock. As long as the market is not on the downside a blue chip will guarantee you steady earnings. Another determining factor of a big stock company is the market capitalization. Remember that the operating history of the business can ONLY be used to determine validity of big stocks.
- NO Guaranteed Returns – There are NO guarantees of long – lasting high returns as investment are full of surprises. It is vital for you to exercise caution while investing and researching the market conditions and what the earnings of the company are before deciding to invest.