Imagine yourself working hard at your desk everyday toiling away for hours together to prepare what you called your monthly report to submit to your boss so that he knows what you have done the past month, for him to release your salary. You know that you have whiled away your time at your computer doing things that might not please him. You also know that if you do not submit the report, then you may not get your salary for that month. Don’t you feel that you would have been better off spending your time trading penny stocks? At least that way you would have got some return for your investment that you put in. Essentially penny stocks are short term equity stocks that are likely to appreciate in the near future. So for example if you buy a stock of GE for say $10 and after a period of six months, sell the same stock for say $500, imagine the amount of money that you can make. In this case you fix the figure of $500 right from the beginning and decide that when the stock reaches that level, you will sell it off. This is the case of appreciation of a stock. You can do the same for a case of depreciation of a stock. So in case you wish to square off your profits earned in one stock by incurring losses in another stock, then you can follow the depreciation rule. You can fix a value which, if the stock attains in the next six months, (say), then you would sell it off at a loss. But there is invariably a question in everybody’s minds about the best penny stocks to buy. Most of the people cannot lay their hands on the best penny stocks to earn quick money. That is to say there are very few people who can play the above game and make a profit. There are people who buy a stock of say Cummins and hold it for years together. They are not called speculators or traders but investors. This is because they are looking at the long-term horizon for their investments. Such a strategy should only be followed for blue chip companies which rarely do badly and consequently their stock price rarely goes in the red. On the other hand there are some companies whose stock price fluctuates varying wildly with their performance in the market as well as their performance in their balance sheets. Such stocks are called as penny stocks and only they are used to speculate or make short term investments. You may well ask how to ascertain whether a stock is a penny stock of a blue chip stock. In other words, penny stocks are those stocks that are priced at under $5 and their market capitalization of less than $5Million and the shares of this company trade over the counter.