Should You Buy Penny Stocks?

Have you wondered if you should buy penny stocks? It’s a good question. There are pros and cons, so let’s look into them.

In the United States, a penny stock is one that trades for less than $5 per share on any market. In common conversation, however, the term can apply to any low-priced, easily manipulated stock, and it often refers to stocks sold outside one of the three major exchanges (NYSE, NASDAQ, and AMEX).

It’s very tempting to get into the stock market by buying penny stocks, seeing as how they’re so cheap. Another reason they’re attractive is because they could dramatically increase in value in short order. However, for the exact same reason, they have a huge potential for quick loss.

After you buy penny stocks, you may find yourself stuck with them. They can be hard to sell. Because these stocks don’t have as many investors, they are usually not traded as often as the more popular and pricy stocks.

In addition, if the particular stocks you’re looking at are listed on a lesser-known exchange, they may not be subject to the same listing requirements or minimum standards that other stocks are. This makes them less stable.

Because of their lesser-known status, penny stocks have become a huge area of income for fraudulent individuals. Through spam emails and internet message boards, many people easily mislead potential investors.

What they do is they encourage investors to dump huge amounts of cash into a stock that has no growth potential, then bailing out and selling their own shares as soon as the prices rise. “Pump and Dump” is the name of this infamous scheme. It has emptied the pockets of many a naive investor and lined the wallets of the fraudulent.

You might be tempted to buy penny stocks for their great prices. But before you invest any kind of money, be aware of all the potential pitfalls. Educate yourself on the track record of any company you want to invest in!

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

- Carlie Evie

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One Response to “Should You Buy Penny Stocks?”

  1. The supply of all the penny stocks is low and thus the price to acquire them is relatively low but the demand appears to be low as well, and thus it is very risky and difficulty to buy and sell good penny stocks. Therefore, one should be prepaid to lose money invested in penny stocks, and actually view penny stock investment as a form of entertainment instead of a source of income.

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