Earlier in the year we examined the definition of stocks and the stock market. Now we will examine an area that must people do not really know a lot about.


A penny stock is one which trades for less than five dollars a share. These stocks are often not traded in the major exchanges such as the New York Stock Exchange  [NYSE], Toronto Stock Exchange [TSX]. These stocks can be easily manipulated by Companies as there is often lack of information on their performance.


However, there are penny stocks which do trade in the major exchanges. These stocks can offer good return, especially in the areas of mining and fertilizers. It should also be noted that many penny stocks have become major stocks over time.


But a word of caution is that these are high risk investments, as many of these stocks lose all of their value in the long run. Different regulators worldwide often give these warnings to new investors, and this should never be taken lightly. With that said, if proper research is done, there are gains to be made from these stocks in the short run. Short run in my mind is holding a stock for a period of 3-6 months.


I currently invest only in mining stocks, which specialize in gold, copper and silver. As we are all aware, gold prices are moving up daily, and are set to go even higher this year. Copper is also moving, and with the move towards alternative energy, it cannot be overlooked, as it is used in the production of batteries. Also to be considered is Companies that specialize in lithium production, which is also a key component. To a lesser extent, I also monitor penny stock Companies who are involved in fertilizer production, which is a critical area, due to the demand for vegetables worldwide. Canada and some Central American Companies are key in this area. 


Tomorrow we will look at some of these stocks and their performance to date.. Happy investing, and please only risk what you can afford to lose, times are hard.