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Take extra care with stocks that sell for extraordinarily low prices. Just because a price is low doesn’t mean the stock is cheap according to traditional ways of determining value. “Penny stocks,” are defined by the Securities and Exchange Commission as stocks that sell for less than $5 per share. They often deserve to be low-priced. The company might be in deep trouble. Plus, penny stocks are subject to manipulation. There are particular schemes to inflate their share price temporarily. It’s crucial to do your homework before investing in a penny stock. Many penny-stock companies don’t file regular financial reports. If a company you’re interested in doesn’t file one, stay away.
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