What is: the term penny stock can mean 2 things: 1) the term penny stock refer to any stock trading outside one of the major stock *exchanges - and / or 2) a penny stock is a low-priced, speculative security of a very small company. Many new investors are lured to the appeal of penny stocks due to the low price and potential for rapid gains which in some cases may be as high as several hundred percent in a few days. Similarly, severe drops also occur and many penny stocks can drop over 99% in the long term. Therefore penny stocks are high risk investments and new investors should be aware of the risks involved. These risks include limited liquidity, lack of
financial reporting, and fraud.
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