Small companies can be a good investment, but they can also be a risky place to put money. Some investors are willing to take the risk and invest in what are called ‘penny stocks’. A core characteristic of penny stocks is that they cost less than traditional stocks. These stocks usually sell below $5 per share, which is much cheaper than major stocks like Amazon or Tesla. How Do Penny Stocks Work? Penny stocks are cheaper than traditional stocks and may trade for anywhere from a fraction of a penny to $5. That said, penny stocks are usually ones that trade below $1. They also don’t usually trade as many shares as traditional stocks. Since penny stocks are a risky investment, they don’t trade on traditional exchanges like NASDAQ or the New York Stock Exchange. Instead, they’re traded on the over-the-counter market, also known as pink sheets. OTC markets trade securities that aren’t listed on major stock exchanges and are decentralized, meaning they don’t have a physical location. An important thing to know about penny stocks is that they tend to be speculative, meaning they