Profiling Penny Stock Investors

After reading some posts on Penny Stocks, I wanted to learn why people would speculate into this risky venture.

I ran across an article describing Corporate insiders, Hedge funds, Newsletter writers, Investor relations firms, Speculators, and Market makers to name a few.


If you invest in Penny Stocks, do feel like you fall into one of these categories? Or, think some traders are a bit shady in their activity vs it's all fair game?


I know, if I were to invest with my limited knowledge I would fall under the category of living a pipe dream hoping for a miracle.

 

Many people want penny stocks because of you pay basically nothing for a share in stocks and then if it succeeds you get a lot of money from it.

 

I'm not a penny stock investor. Heck, I am not even primarily a stock investor. While it's unlikely I'll find a penny stock that fits my investment criteria, if I do & it gives me a buy signal, I'll absolutely invest something in it. Here's why. It's almost like having leverage without having to borrow money because a small move in price is a huge percentage move. Leverage can work against you the same way it can work for you though, so it's usually a bad idea to bet the farm on such a thing.

 

I think the reason go for them is simply because they have a low denomination and people can see big returns if they get it right. It's like sticking small coins into a slot machine.

Those that get involved in penny stocks are definitely speculators. I've lost a bit of money playing in this space but I kind of went in with my eyes open. I knew it wasn't 'proper' investing so I wasn't too sucked in by it all. I do think that there are a lot of people that confuse investment with speculation though.

 

I think penny stocks are popular because of the low amount you have to pay out in the first place. While the return might also be low, there's are occasions were people have made a lot, although they're pretty rare and for me it's not worth the hassle.