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Penny Stocks vs. Small-Cap Stocks

Investors should be clear about key differences between penny stocks and small-cap stocks.

Spotlight

Penny stocks are generally riskier and more susceptible to price manipulation than small-cap stocks that are traded on major stock indexes.

Spotlight

Penny stocks typically relate to companies with a market cap of less than $300 million, while small-cap stocks are often associated with companies that have a market cap of up to $2 billion.

Spotlight

Traded on OTC markets.

Not subject to the regulations and scrutiny of the SEC or major stock indexes.

Typically cost less than $5 per share and may cost less than $1.

Susceptible to price manipulation through fraudulent activity

Most trade on major stock indexes.

If listed on a major stock index, it must file regular financial reports with the SEC.

May cost more than $5 per share.

Less susceptible to price manipulation, though not completely protected from it.