A Penny Stock Defined
A true penny stock is officially designated as any stock trading below five dollars, however most people consider any stock trading below one dollar to be the true definition of a penny stock. Most stocks trading below the one dollar level usually trade almost exclusively on the Over the Counter Bulletin Board. There are OTCBB stocks priced above one dollar, most however are priced in the cents rather than dollars.
Another exchange that is an exclusive penny stock exchange, is the Pink Sheets. Pink Sheet stocks are companies that do not provide up to date financial filings and are very difficult to acquire information used to determine the financial health of the company. Pink Sheet stocks are considered highly speculative and are best left to experienced and well funded investors.
Because of their inexpensive price, many inexperienced investors gravitate to penny stocks. However it should be noted that penny stocks are better suited to the experienced rather than the novice and caution should be exercised before ever investing in a penny stock company.