Types of Penny Shares
Although all penny shares have similar low costs, the companies that they belong to can have incredibly varied
This leads to penny shares being split into several sub categories that describe the industry that they belong to, the age of the company they come from, or even the trading pattern the share falls in to.
New companies, or newly public companies, often begin their trading lives as penny shares.
This is one of the most popular types of penny share, simply because new companies have great potential for quick rises in profit.
Shares in companies that are now large and incredibly successful may once have been classified as being penny shares.
Investors that invest in new company shares therefore hope that they are sitting on what could one day be a gold mine.
Penny shares with particular trading patterns are also popular. 'Recovery' shares, 'cyclical' shares and 'defensive' shares are classifications that are commonly used within the economic market to describe the way particular penny shares increase and decrease in value.
Recovery shares are those which belong to a company that was once worth much more than its present value, but which holds the potential to climb back to the former successes.
Defensive shares are those which gain or retain value despite a declining economic environment, and tend to belong to industries which provide vital services or products to the public (food, water, electricity, gas).
Cyclical shares are those which are somewhat predictable; they decrease in value periodically - perhaps seasonally, or as a result of environmental, political or economic factors - but are likely to increase just as regularly.