Oh my oh my! How many times have you heard this question? Yes, there is a ton of risk trading penny stocks, now understand penny stocks are considered stock trading at $5 and under, but when people hear penny stocks we think of just that, stocks trading in pennies; .12, .25, .03, you get the idea. The main concern when looking at the investors who trade this is that they generally do not do much due diligence (DD) into these companies, and they should, tons of it. When we look at Fortune 500 companies, investors generally do not do any DD into them either, that’s because we know they must e legit, right? Of course, or they could never be on the Fortune 500. Basically, many of us are too lazy to dig deep into these companies trading under $1. We see a stock trading .05, we see; “Wow, I can get a lot of shares for $1000”. So, you go to the company’s website, read a few press releases, and that’s good enough.
Always do your homework regardless if it’s on the NYSE or the OTCQB and maybe you’ll get lucky and find a winner, as there were plenty of penny stocks that broke out into good companies, and thus have seen the stock price increase as well.