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A popular option that many new investors might consider are investing in penny stocks. These stocks are referred to as penny stocks, because they’re usually under a $5, or at least close to it.
There are some obvious benefits right off the bat that Canadian investors might think of when considering penny stocks. If you made a large investment and the stock moves up even slightly, you could be swimming in cash.
But the reverse is also true. Should you make a large investment, it can be relatively easy for those shares to plummet, and all your funds with it. So, what should Motley Fool investors consider before getting into penny stocks?
What’s a penny stock?
First off, let’s identify what exactly penny stocks are. Penny stocks are those with a market capitalization between $50 and $300 million. Shares trade at $5 and under. They tend to be small businesses with not to much history and therefore don’t operate at a profit most of the time. This means they rely on debt based on their business models that have yet to be proven.
If you’re getting into penny stocks, it means you really believe in the company’s future. And while it’s great for some investors to hop on board, penny stocks are really for large investors. These are people getting a large piece of the action and work with the company to see it succeed.
Motley Fool investors, however, are simply bystanders who can merely hope that the company does well. You don’t get a real…
