Difference Between Penny Stocks and Small Capital Stocks
What is Penny Stocks The term "penny stocks" refers to stocks that have a very low price per share. These stocks can be traded in the over-the-counter (OTC) market, which is characterized by low liquidity and wide bid-ask spreads. As a result, penny stocks are considered high risk investments that do not undergo the same level of scrutiny as other stocks listed in the major exchanges. Penny stocks are often considered “higher risk” investments due to the lack of information about the company and the limited market for these stocks. Traders and investors take on this higher risk in hopes that the payoff will be large enough to offset the risks involved. What is Small Capital Stocks Small-cap stocks are stocks that usually have a market capitalization of between $300 million and $2 billion. Some people also refer to small-cap stocks as penny stocks. A stock is considered a small-cap stock if it falls within the top 3,000 stocks in ...