Mortgage Forum Live » penny stocks http://www.mortgageforumlive.com Let us talk about Mortgage, Real Estate & Finance! Fri, 02 Sep 2011 04:17:06 +0000 en hourly 1 http://wordpress.org/?v=3.1 Should I Invest and Buy Penny Stocks? http://www.mortgageforumlive.com/2010/02/02/should-i-invest-and-buy-penny-stocks/ http://www.mortgageforumlive.com/2010/02/02/should-i-invest-and-buy-penny-stocks/#comments Tue, 02 Feb 2010 04:12:06 +0000 Carlie Evie http://www.mortgageforumlive.com/2010/02/02/should-i-invest-and-buy-penny-stocks/ That’s a good question… should you buy penny stocks? There are pros and cons, so let’s look into them.

First of all, what is a penny stock? In the United States, it’s a stock that’s worth less than $5 per share, regardless of the market. In common conversation, however, the term can apply to any low-priced, easily manipulated stock, and it often refers to stocks sold outside one of the three major exchanges (NYSE, NASDAQ, and AMEX).

Because they’re priced so cheaply, penny stocks are a very tempting way to break into the stock market. They have the potential to increase in value by over several hundred percent in a short time thanks to their low prices. The problem is that for the same reason, there’s a big potential for high losses.

After you buy penny stocks, you may find yourself stuck with them. They can be hard to sell. These stocks are not traded nearly as often as the more popular and higher-priced stocks. They have fewer investors.

In addition, if the particular stocks you’re looking at are listed on a lesser-known exchange, they may not be subject to the same listing requirements or minimum standards that other stocks are. This makes them less stable.

Because of their lesser-known status, penny stocks have become a huge area of income for fraudulent individuals. Through spam emails and internet message boards, many people easily mislead potential investors.

What they do is they encourage investors to dump huge amounts of cash into a stock that has no growth potential, then bailing out and selling their own shares as soon as the prices rise. This scheme has a name: “Pump and Dump.” It profits the fraudulent and results in big losses for the naive investor.

The cheap prices might make you inclined to buy penny stocks. But before you invest any kind of money, be aware of all the potential pitfalls. Do your research and know who you’re dealing with!

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- Carlie Evie

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