Penny stocks is a risky investment strategy. One of the reasons is that companies dealing with them are not required to file with the Security Exchange Commission. The information available is not from credible sources. Another risk is that they don't have a minimum standard to remain at the stock exchange like regular shares. Many pennystock companies are either on the verge of bankruptcy or new and with poor or no track records. Pennystocks don't have much liquidity and it is hard to find a buyer for a particular stock. Therefore, investors resort to sell them at very low prices.
Investment in penny stocks is riskier because they represent low quality as the majority of troubled companies become penny stocks if they aren’t trading at better levels. Trading penny stocks is a game of chance - We can say that penny stock trading is like gambling, it depends on how strong approaches you are using in your trades.
Penny stocks are only appealing to the brokers who sell the penny stocks and the companies selling "penny stock signals!". Generally penny stocks provide abysmal returns to the average investor.
