They are a coinflip since you have decide if its good to buy a stock at $5 versus $50 and wait to have the value increase and then sell. However it may not be such a goldmine if you don't have enough in the end.
Penny stocks are dodgy, I know people who have succeeded with them but..the majority haven't. You don't know much about the company, and although the amount is less, it does not provide a good return. Especially considering the volatility of the market.
Especially you are 100% sure a penny stock would increase in you view, you can buy that penny stock. But how could you know your decision are right completely? So, I don't recommend to trade in penny stocks. But I am right now trade in penny stocks use small money because I am try to practice my eyes, to analysis as a beginning investor.
That's pretty much the whole point of them though. Loosing a few "pennies" isn't really a big deal. But you're right it's riskier than playing with the bigger established brand stocks.
The worst thing about Penny stocks is the flat out fraudsters trying to scam you into buying their cheapo stocks and then dumping them. So I would say that penny stocks aren't bad because they are cheap (it's possible they are simply currently undervalued), it's that you will have a hard time finding reliable information about what their true calculable value should be. And that low liquidity you always have to take in your calculations... what if you are stuck with a turd?
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i must certainly agree with you on this because the truth about the matter is that often times people fail to put into consideration this important fact that you have just mentioned.
Sure, we lose less money because it's a penny stock, but it's not an investment with a clear outcome, that is why they are more risky.
My grandfather invested a lot of money in penny stock over a period of time. In the end he lost it all. It is sad that people lose with such things. I do like Strykar's concept though.
Of course Penny Stocks are extremely risky. That's what makes it possible for you to make so much money off them. Either it goes up a cent and your $1000 investment becomes worth $1500 or it goes down and it's worth $500. You really have to know what you're doing not to lose money in this game.
