Penny stocks are very Risky

Discussion in 'Penny Stocks' started by waseem59, May 10, 2014.

  1. SpaceGuy

    SpaceGuy New Member

    Joined:
    May 2014
    Posts:
    2
    Likes Received:
    0
    What makes Penny stock so risky? As someone with limited income and a small budget, penny stocks do seem appealing to get the hang of the game. Should I save my money for something else or take a look into the Penny stocks?
     
  2. JR Ewing

    JR Ewing Super Moderator Staff Member

    Joined:
    Feb 2014
    Posts:
    4,950
    Likes Received:
    39
    You need solid fundamentals / growth / value or another very compelling reason likely to cause the price to go up in order to make an intelligent buy of shares of a company. Healthy daily volume and increasing institutional interest are also desirable. Most penny stocks are penny stocks because these things are lacking in general.

    If these things are occuring, it's very unlikely that the price will be < $1, and if it is, it won't be for long. Beyond this, sticker price shouldn't really be a factor otherwise. Some stocks are cheap at $1000, and others are overpriced at $10 or even $1 or less.
     
  3. fortunado30

    fortunado30 Member

    Joined:
    May 2014
    Posts:
    11
    Likes Received:
    0
    I think the example on penny stocks given on the Wolf on Wall Street is an example of why this investment is no good. People have been saying to avoid penny stocks for years. I think the only people making money are the ones who are selling them.
     
  4. Kate

    Kate Senior Investor

    Joined:
    Apr 2014
    Posts:
    515
    Likes Received:
    5
    Maybe not many, but it happens. Are you familiar with Concur Technologies? It opened at $85.49 today. So what, right?

    Well! if you'd been buying stock in the spring of '01, you could have bought it for around 31 cents a share. How I'd love to say that I did... but :mad:

    You drink Monster Energy drinks? Could have bought their stock for 69 cents in 1995. This morning it opened at nearly $70.

    Oh, something more current? If you'd bought General Growth Properties stock in 2009, just five years ago, for 59 cents, you would have opened at nearly $24 today.

    So anyhow, getting to my point, everyone knows penny stocks are risky, but demonizing them as being nasty to buy isn't always true.
     
    • Like Like x 1
  5. JR Ewing

    JR Ewing Super Moderator Staff Member

    Joined:
    Feb 2014
    Posts:
    4,950
    Likes Received:
    39
    The thing to keep in mind is that those are in the vast minority. That's why it's so important to research before you buy and only dabble lightly in stocks < $1. Even then, there's certainly no guarantee that a company that looks great on paper will go from very little to a lot.
     
  6. nashvilleshelby

    nashvilleshelby Active Member

    Joined:
    Jun 2014
    Posts:
    44
    Likes Received:
    0
    The fact is that you will not know unless you try. To many of us get paralyze because you do not want to lose. But, think of all that you can gain!
     
  7. oranika

    oranika Member

    Joined:
    Jun 2014
    Posts:
    7
    Likes Received:
    0
    There is also an issue which penny stock traders particularly new ones may not be aware of. Many Penny stocks have liquidity problems. The rule of the thumb for choosing which penny stocks to buy is to look into their traded volumes. It will reveal a lot of information about the liquidity of the penny stock in question.
     
  8. Allison2021

    Allison2021 Well-Known Member

    Joined:
    Jun 2014
    Posts:
    108
    Likes Received:
    1
    Penny Stocks are certainly risky. Yet, they are fun to speculate on because they generally improve. Even if they only improve a little itty-bitty bit, then that's better than nothing. My CD is only earning 1.9%, and my 403b is doing only adequate or doing double the mark of inflation. So, why not have some fun?
     
  9. lwhite

    lwhite Guest

    Joined:
    Jun 2014
    Posts:
    13
    Likes Received:
    0
    You are absolutely right! I was on the internet a while back doing research on stocks and I read the same exact thing that you are talking about. It is true that you should be careful with penny stocks. Just because it's a small investment, doesn't mean there won't be any risk. Great thread!
     
  10. Kate

    Kate Senior Investor

    Joined:
    Apr 2014
    Posts:
    515
    Likes Received:
    5
    Now there's someone who thinks like I do. :D I've been thinking about penny stocks for years, but always in the "fun slash hobby" part of my brain... I stick to real estate and gold for serious investing. I'd like to expand to stocks, but I have a *lot* of research to do before I'm ready for that move.
     

Share This Page