Penny Shares
Penny Shares were traditionally defined as shares that cost less than 100p, but the definition has been updated to refer to shares with a low level of liquidity, and a spread between buying and selling prices of at least 10%.
The low liquidity means that these shares have a high volatility, i.e. their prices are easily influenced simply by buying and selling, and so can change dramatically over short periods.
For this reason penny shares are often attractive to investors comfortable with high risk, as potentially both losses and returns can be high.
Some companies which started out with their shares classed as penny shares have grown to be huge, profitable companies - Microsoft is a famous example - but this is rare.
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