Should I Invest and Buy Penny Stocks?

That’s a good question… should you buy penny stocks? Why don’t we weigh some of the pros and cons?

A penny stock in the United States is a stock in any market that you can trade for less than $5 per share. On the other hand, the term can also apply to any lower priced and easily manipulated stock. It will often refer to a stock sold outside NYSE, NASDAQ, and MEX, the three major stock exchanges.

Penny stocks, because they are priced so low, are a tempting way to get into the stock market. They have the potential to increase in value by over several hundred percent in a short time thanks to their low prices. However, for the exact same reason, they have a huge potential for quick loss.

If you buy penny stocks, you just might have a tough time selling them them off. Because these stocks don’t have as many investors, they are usually not traded as often as the more popular and pricy stocks.

You’re taking a risk when you invest in these kinds of stocks, because if you are looking into a less known exchange, the stocks may not be subject to the same standards and requirements that other stocks are. This makes them less stable.

Another thing: Penny stocks are a great source of income for fraudulent individuals. This is due to the stock’s less known status. Many investors have been misled by these people through spam emails and internet message boards.

They get investors to pour huge amounts of money into a stock that has no real potential for growth, and then selling their own shares when the price rises. This scheme has a name: “Pump and Dump.” It profits the fraudulent and results in big losses for the naive investor.

You might be tempted to buy penny stocks for their great prices. But be careful: Keep in mind all the possible pitfalls before you invest any kind of money. Do your research and know who you’re dealing with!

Visit How to Buy Stocks and get all the free help you need in discovering How to Trade Stocks, Stock Market Basics and so much more!

- Carlie Evie