What are penny shares
In the UK if a company has a low value then it is a penny share. There seems to be debate about what exactly constitutes a penny share, for many it is a share that has a value of under one pound, though some place it even lower. There are shares that from time to time are worth literally pence, these are the ultimate penny shares in one sense!
Penny shares are seen as high risk, and also refer to ones that are not traded on the main stock exchange. They also can be quite difficult to sell on.
Because of this then buying penny shares needs to be entered into with your eyes wide open to ensure that you understand the risk, and ensure that you do the appropriate research into the company to see why the share price is so low. Because the share price is so low, then remember that any tiny movement in the share price will represent a massive percentage change in the value of that share, and therefore they can be volatile.
As a simple example, imagine a share that is worth 500p moving by 1p: that is a tiny percentage change. However imagine now that the share is worth 10p and moves by 1p: in percentage terms now that is a hugely significant percentage change in value, and therefore your holding.
More investment related articles:
- The distinction between a bondholder and a shareholder
- What does maturity mean in relation to bonds?
- Your stock market portfolio and diversification
- Yield: key bond terms
- How to keep on top of your investment portfolio
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- House prices in BS8 1
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- House prices in IG10 4
