My Stock Forum

Does anyone know anything about penny stocks and how good they are investment wise?

I've been hearing a lot about penny stocks lately, but haven't done much investing so I wanted other peoples point views on them.

Public Comments

1. I can name a few people who have gone to prison over penny stocks. Not worth the effort, and pennies lead to dollars of loss if you're not careful. Very risky to say the least.
2. A trip to Las Vegas or to the corner store for a lottery ticket is a wiser investment.
3. Unless you know something personally about the particular stock, this is not investing, it is gambling. Invest in what you know. Invest in something more liquid that trades regularly.
4. Typically they lie somewhere between poor and worthless. There is generally a reason why the shares are not more highly valued. You could get lucky, and make some money, or unlucky -- and lose quite a lot.
5. Penny Stocks are the last thing a new trader should be getting into. You are going down a road that most of us have been down. We started out thinking how easy it would be. I know a firm that will walk you through them, etc. It's not going to happen for you. You may luck out on one or two..... but you will lose big money. Take a year before you even put 1 penny down. Read as much as you can. Know the risks. Know money management (as it relates to investing and risk/reward ratios). Start investing with Mutual Funds and later large cap stocks. Do some ETF's. Have an "asset allocation" (always). Read Read Read. And then read some more. Consider yourself warned.
6. Penny stocks, many of which trade on the pink sheets (OTCBB), are not under the same scrutiny as a typically-traded public stock. NYSE, Nasdaq and Amex stocks all need to adhere to certain disclosure, oversight, governance and minimum financial health regulations. Penny stocks are thinly traded and highly illiquid, meaning that small movements can significantly impact the trading price. It is easier for irreputable traders to influence the price of penny stocks in their favor and "insider" trading is rampant. Some "fallen angel" stocks can wind up in the pink sheets or as penny stocks. These are reputable companies that have lost so much value in the markets that they de-list from the major exchanges and maintain a listing on the pink sheets. These may eventually climb their way out. But overall, penny stocks are generally a fool investor's game.
7. Many people think that penny stocks are a good idea because you can buy lots of shares for a very small price. The problem is that most of these companies are in dire financial situations, making them very risky investments. The companies usually have little or no income and operate with huge debts. Rather than buying lots of penny stocks, look into getting a few shares of a reputable company.
8. try http://pennystockpicksfree.blogspot.com