| Many people who are new to learning the stock | | | | might take quite some time to double in price. On the |
| market turn to penny stocks as their first endeavor | | | | other hand though, it's really more likely that the price |
| because they are cheap, and are touted to have a | | | | of the $.01 stock will remain the same, or decrease. |
| very large return if things go your way. There are | | | | More money is lost playing these stocks, than is |
| some things you need to know before getting | | | | made, and that is because they are usually only |
| started though. | | | | traded by amateur traders. |
| Yes, it is true that penny stocks are cheap. They get | | | | Penny stocks are also a notoriously high-risk and |
| this name because they do indeed cost only pennies; | | | | shaky investment. Some people are very good at |
| some even cost only a fraction of a penny. The thing | | | | predicting the movements of these stocks, but more |
| is, though, that you have to buy quite a few of | | | | often than not, these stocks remain rather stagnant |
| them to make any real profit. There's no difference | | | | unless the underlying company really makes a |
| between buying 10,000 of a $.01 stock, or 100 of a | | | | breakthrough. If the company folds, the stock |
| $10 stock; the cost is still $1000. That $.01 is likely to | | | | becomes worthless, or nearly worthless. these |
| only move in price by fractions of a penny, so you | | | | stocks are also thinly traded, meaning that their daily |
| need those 10,000 shares to make any profit. | | | | volume is low, so even if you want to get out of a |
| Percentage-wise, it winds up the same in either case. | | | | flat, or losing position, there might not even be |
| The difference though, is that it's more likely that the | | | | anyone out there willing to buy those stocks you |
| penny stock will raise to two pennies or higher in a | | | | want to unload. |
| short burst, as opposed to the $10 stock which | | | | |