When you begin researching how to buy penny stocks, you’re bound to run into a little confusion right up front: what exactly is a penny stock anyways? The definition is a little muddled, unfortunately, and different people provide different benchmarks for the definition.
The SEC (the Securities and Exchange Commission) calls any low-priced speculative stock a penny stock. But folks in investment tend to like more concrete definitions.
Some investors call any stock listed on quotation services like the OTCBB or Pink Sheets as penny stocks. Some believe the term penny stock and microcap stock are interchangeable. A microcap stock is any stock with a calculated market cap at or below $250 million. Still others believe it is simply a stock which sells for under 5 dollars per share.
That last definition is probably the most common definition, but to be more safe and precise, any stock which fulfills more than one or two of those parameters is probably a penny stock. So now when you go to buy penny stocks, you’ll have a better definition for what you’re actually trading.
