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Should you buy penny stocks? That’s an excellent question. Let’s look at some of the pros and cons.

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).

Penny stocks, because they are priced so low, are a tempting way to get into the stock market. Their low prices mean they have the potential for increases of several hundred percent over a few days. 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 means that they aren’t as 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, called a “Pump and Dump” results in huge profits for the fraudulent, and huge losses for the naive.

The cheap prices might make you inclined to buy penny stocks. 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, How to Short Stocks and so much more!

- Carlie Evie

Tags: email, Internet, Marketing, message, money, profits, search, Source

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Tags: email, Internet, message, money, profits, search, Source

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