Are penny stocks a scam

Answer 1

Most companies are required to file statements about their business including financial statements that show their balance sheet and income statements. Exchanges such as the OTCBB and especially the Pink Sheets have much more lax requirements so there is much less certainty in the viability of the company.

The second reason is lower priced stocks can have much larger percentage price swings. For example, if you own shares of a stock at .05 and the stock drops to .03, it has just dropped 40% in value. If you were betting a small amount of money on a stock that you thought would go up, this may be acceptable, but most people would not put large amounts of their retirement savings on a stock that could drop 40% in a few seconds.

Answer 2

Yes, if you know what you are doing. There is a learning curve that you must walk... not run, before investing in penny stocks. Most people stay out of penny stocks due to their high volatility. You can lose it all, just like you can make a huge profit, if you start out and simply break even, you are one of the lucky few.

Things you will need to start investing in penny stocks would include:

A real-time stock quote software, do a search and you will find plenty to choose from.

You will need to get educated on terms such as: volume, MACD, MA, channels, etc. Your source for a lot of this knowledge should come from a site like Investopedia.com

Try to steer clear from Stock Promoters that get paid to promote a stock. Stock Promoters themselves are not bad, they are simply promoting a stock just like a company advertises on television. Beginner investors put too much credibility behind the Promoter without doing their own due diligence before investing in a stock.

Beginner investors usually get greedy thinking that they are guaranteed to make a profit on a trade and lose it all because they beat it all. Never put more than 10% of your buying power (money) in any penny stock and make sure you clearly define when you plan to get in and out, and when you plan to get out if it goes against you.

Term you need to learn is "limit buy" always use a limit buy and limit sell order when making trades.

Another thing to consider, choose the right stock broker, a search will give you a list to research. Make sure there are no hidden fees for trading penny stocks.

Start off slow, invest small, and as you education grows, your confidence will grow. Give it time and don't rush it, consitence is key.

Answer 3

Penny stocks are very risky. People buy them to gamble on the chance that a new company might make it big, but the overwhelming majority of them do not. Most penny stocks have little to no company history so it is difficult to determine how good of a company you are investing in, and once you buy them they may be very difficult to sell again. If you don't want to gamble with your money, buy blue chip stocks or index funds. If you do want a higher risk investment, consider investing in a local business which you know something about.

Answer 4

Stay Away from Penny Stocks

We are all attracted to Penny Stocks. These stocks cost us around Rs. 10 or 20 each and even a small investor can afford hundreds of thousands of shares. Some of them even blow the roof and grow at over 50 or 60% in a matter of days. However, such rises may be purely based on rumors or speculations and they may lack sound fundamentals or financials. Every time you will see that a penny stock which was a hot pick during a bull run, will be nowhere to see when the markets go bust. In fact, these are the ones that go down first and some may even shut down their businesses.

The Lesson here is: Stay away from penny stocks. It is better to buy the shares of a good company with solid fundamentals at Rs.1000 than buy 100 shares of a tom-dick-n-harry company at Rs.10 each

Answer 5

In Wall Street urban legends, penny stocks feature prominently as the diamond in the rough no one else noticed. The pennies risked by the small time investor turn into dollars and then into million dollar portfolios. While that is possible, investors need to understand the pitfalls as well as the potential gains.

Exchanges

Shares that sell for pennies or even fractions of a penny are most commonly traded "over the counter" and not listed on the major exchanges. These companies are often very small, just beginning to make public share offerings or both. Quotes for penny stocks are listed in the "Pink Sheets" or on the Over the Counter Bulletin Board (OTCBB). Companies listed by the OTCBB have to be compliant with SEC reporting regulations while those listed in the Pink Sheets do not. The few found on the NYSE or NASDAQ exhanges are often shares in companies facing bankruptcy and soon to be dropped from the exchange.

Fees

Because they aren't listed on the major exchanges many brokerage houses won't deal with penny stocks or charge extra fees to trade them. The extra fee might be a higher commission or be based on the number of shares traded. Since documents are often physically transferred between the issuing company and the brokerage service, an investor can also expect a possible "document transfer fee" (DTF). The DTF can range into the hundreds of dollars.

Trading

Penny stocks can also be cursed by low volume trading so that entry and exit points for trading are limited. The few participants in the market and large institutional holders can determine to a how many shares are traded and at what price. Conversely, they can enter phases of extreme high volume as victims of predatory "pump and dump" schemes. Investors should watch for signs of unusual trading activity.

As with any kind of investing, the key is due diligence which can be difficult given the lower reporting standards. Still, a careful investigation may give the small-time investor a chance to invest in a future corporate giant and get in on the ground level with only a few pennies risked.

Answer 6

if you,re looking for some good information about penny shares, I would recommend that you Google penny stocks.

The short answer is that they are a very risky investment.

Answer 7

Heck yeah