Penny Stocks, Microcaps, and OTC Stocks Explained

Penny stocks can be used as a catch-all term for several types of speculative stock investments, but most commonly, it refers to small public companies trading for less than $5 per share. However, high volatility and frequent fraud can make investing in penny stocks, and similar speculative securities, very risky. Understanding some key definitions, as well as the unique risks, that come with trading these speculative securities can help you make more informed investing decisions.

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