The Motley Fool has certainly done its share of campaigning to dissuade investors from dipping hard-earned funds into so-called "penny stocks," or stocks trading under $5 per share at a market cap under $100 million. We have always wanted to keep folks from falling into the "Microsoft (NASDAQ:MSFT) used to trade for [insert amount of] cents per share, so maybe I'll drop a few dollars into [insert flimsy company]" trap."

Reminding investors that many micro-cap companies, especially those traded outside the bright lights of the New York Stock Exchange, Nasdaq, or American Stock Exchange, can be risky propositions -- or even outright frauds -- is certainly valuable. A story by Ari Weinberg posted on Forbes.com Wednesday afternoon, however, takes a slightly different approach: Weinberg notes that many smaller companies, unwilling to deal with the rules and costs brought on by recent securities regulation, are either removing their stocks from major exchanges or going private.

Investors in such companies -- aside from those bought out in going-private transactions -- must be sure they understand exactly what is going on in order to decide whether they're willing to allow an investment to operate outside the system of checks and balances that the major exchanges provide.

When I last wrote about penny stocks in the Small-Cap Foolish 8 column space a few years ago, I received several emails extolling the virtues of specific small companies trading on the Pink Sheets or the Bulletin Board. Some respondents made compelling arguments.

As a result, I've decided that rather than paint all small or "minor-exchange" companies with one brush, I'd summarize my take on penny stocks as follows:

  • Don't fret if you don't have lots of money to invest. If your financial house is in order, there are plenty of ways you can get into the market with smaller sums.
  • Securities regulations, by and large, are there for your protection.

If you can find a place in your investment philosophy for those small tidbits, taking into account your own financial situation, risk tolerance, zest for researching companies, and understanding of stock analysis, you'll be in fine shape. Fool co-founder Tom Gardner is one example of someone who is sifting for Hidden Gems in the market. The exhaustive research he puts into his newsletter is paying off, and it may be worth a look if you're interested in investing in smaller companies.

Today, another Fool, Tom Jacobs, takes a look at the top 10 stock performers since Sept. 11, 2001 on the major exchanges. Sure enough, some of them had been in Penny Land back then. But as Tom warns, you simply must tread carefully -- very carefully -- when analyzing these companies. The worst thing you can do is take a "hot tip" on a penny stock and pluck your money down without any further research.