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What are Penny Stocks?
Penny Stocks are stocks that trade at a very low price and have a low market capitalization. In the Indian stock market, these are typically stocks with prices below Rs 10.
Key takeaways
- Penny Stocks are stocks that trade at a very low price and have a low market capitalization.
- In the Indian stock market, Penny Stocks are those which have prices below Rs 10.
- Penny Stocks are characterized by low cost, high risk, and illiquidity.
- These stocks, even though very risky in nature, have a history of giving higher returns when invested carefully, compared to other forms of securities.
Stocks that trade at a very low price and have a low market capitalization are referred to as Penny Stocks. Depending on the market capitalization of the company, these stocks are also called nano-cap stocks, micro-cap stocks, and small-cap stocks. Although there is no official rule, Penny Stocks in the Indian stock market are those which have prices below Rs 10.
Features
Low cost: As the prices of these stocks are below 10, investors can buy a quantum of stock units with a small investment.
High-risk: These stocks are issued by mostly small-cap companies. More we invest in small-cap, the more risky our portfolio is but at the same time, chances of getting higher returns increases. These stocks, even though very risky in nature, have a history of giving higher returns when invested carefully, compared to other forms of securities.
Illiquid: Trading stocks in the market is easy but this is not the case with penny stocks. The companies issuing these stocks are relatively unpopular which makes it tough for a seller to find a buyer. Thus, Penny Stocks are considered to be illiquid.
Frequently asked questions
What are Penny Stocks?
Penny Stocks are stocks that trade at a very low price and have a low market capitalization.
What is the definition of Penny Stocks in the Indian stock market?
In the Indian stock market, Penny Stocks are those which have prices below Rs 10.
What are the features of Penny Stocks?
Penny Stocks are characterized by low cost, high risk, and illiquidity.
Written by
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