What are Canadian Penny Stocks

It will not be too far fetched if we compare penny stock to one of the smallest fish species in the vast ocean of investment instruments available today. But as it is often the case, small fish is an essential ring of the food chain in the ocean, and it thus plays a key role in maintaining the marine environment in balance. By the same token, penny stocks are investment instruments with a nominal value of less than five US dollars. And while it is true that many investors will laugh out at the possibility of playing so small, penny stocks possess some mushroom-like qualities in the sense that they can grow very quickly, just like mushrooms do after summer rain, and yield some substantial profit in return for the time one has taken to deal with them. As Canada's economy is now experiencing something like a post-crisis Renaissance, many people have already acknowledged the underlying potential of these small-cap investment instruments.

It should be noted that Canadian penny stocks offer great opportunities to keep track of some promising young Canadian companies, and you may be one of the first to build shareholder value with them, because the saying “The early bird catches the worm,” is especially true for investment.

In general, penny stocks in Canada specialize in commodities, as the country is very rich in natural resources, and technology, taking pride in having some of the best technical universities in the world.

And if you have already developed an I-wanna-have-it attitude towards these mushroom-like investment tools, you’d better hold on a little - you may want to first learn about the small-cap and big-cap stocks. As clear from their names, big-cap stocks represent shares of larger business entities, while small-cap stocks refer to shares of smaller businesses. In this line of thinking, one can conclude that Canadian penny stocks fall in the latter category. On the other hand, small-cap stocks are a big deal, owing mainly to their low nominal value and huge potential to outgrow some of the biggest big-cap stocks.

To satisfy your desire to have penny stocks, you may be happy to find out that it is relatively easy to purchase these investment instruments through the Toronto Stock Exchange or the TSX Venture Exchange. Note that Canadian penny stocks trade only in the country’s national currency. Also, you will need to find a stockbroker who is authorized to purchase Canadian penny stocks. After you have contacted a stockbroker, ask him or her what’s the best deal on the market, because you do not want to buy shares in some still-born enterprise, right?

Some wise heads suggest that you stay away from companies that boast on a roller-coaster success, because these are investment bubbles, and you will end up losing every cent of your hard-earned money when they go bang.

There isn’t an exact prescription as to how much money you have to invest in Canadian penny stocks. Just have in mind that they usually have high returnability, which means that your profit is very likely to be higher than the one traditional stocks may yield.



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