Blue-Chip Stocks

Everybody understands about the blue-chip stocks like, Apple, Microsoft, and Ford Motors. These are the well-established companies, who have usually been in business for a long period of time. They are well-known, house-hold name brands. The stocks are often high enough that the average person has a difficult time buying multiple shares.

Penny Stocks

But have you ever heard of a Penny Stock? Penny stocks are stocks, but are much smaller than regular stocks, Penny Stocks only sell for pennies. Penny Stocks, also known as penny shares, micro-caps, micro-chips, cheap stocks, have a price of up to $5. They are traded mostly online.

Of course, the blue-chip stocks started out as penny stocks. There are two main reasons that penny stocks are so cheap:

  1. Regular stock prices have fallen due to a company’s financial poor health.
  2. A company is in the early stages of being publicly traded.

Obviously, it is best to invest in the newly publicly traded company. It is probably not a good idea to invest heavily in a company that has a poor financial record.

Newly Publicly Traded Companies

Research may be difficult concerning a newly publicly traded company. There is usually not as much information readily available as there would be on a more established company. However, this should not deter you from considering investing in penny stocks. You can still gain enough information about these companies to make an informed decision as to their financial health. These companies are not necessarily start up companies. In fact, some of these companies have been around for many years. But they were funded by private investors or by the owners themselves.

Fallen Stock Prices Due to Financial Difficulties

It is possible to make a killing when a company has had financial difficulties. During that period of time, the stock prices might fall considerably. So buying these stocks during that time can be like buying from a bargain basement sales event. Many large, well-established companies have gone through difficult times and then rebounded. Of course, if the company cannot rebound you have just lost your investment. So there must be a good reason to buy. Perhaps the company is going through a re-structuring. They have hired a new CEO who has a reputation for rebuilding distressed companies. Perhaps they have a new product that has been recently approved by the governing agency for that sector. Whatever the reason, it is imperative that you do your own research. Not all companies can rebound. But if you buy into one that does, you can position yourself very well financially.