What are they? Penny stocks are the share offerings of companies that are new, or too small to have a stock exchange listing on the large stock exchanges.
These stocks can be of interest to investors due to the small initial investment required, and the possibility of good returns.
You are probably already aware that they are considered high risk investments.
  There is always the possibility that a small or new company could go under.
  The rules governing the financial reports of penny stocks are not as strict as for larger shares on the other stock exchanges.
  These shares can therefore be at risk of manipulation.
  A "pump and dump" scheme refers to a scheme where investors manipulate the purchase of the shares, causing the price to climb, and then dump their shares at a major profit.
  It is therefore important that you do not buy penny stocks that have recently risen sharply.
Although this sounds rather risky, penny stocks can play a role in your portfolio and can make large profits for you.
It is important to find good beginner companies that have great potential.
Most companies started out small, and many have made extreme profits for the first buyers of those stocks.
How to Choose a Penny Stock When selecting an appropriate penny stock to invest in, you need to find out some information about the business.
It is also important to check that the company has been around for a reasonable amount of time (ie not less than a year unless you intend to day or swing trade).
  Also look at the price it has been trading at and if it has been hovering around that price for a while, or if it has dropped sharply at any point.
  As with all stocks, any purchases of stocks by it's own company management is a good sign! If you need help choosing stocks there are a few good lists you can purchase which get updated regularly.
  The investigation and analysis of the stocks would already have been done by experts, leaving you with nothing to do but buy the stocks.