Penny stocks – a speculator’s heaven
If there’s any hope of you getting rich quick – this might be one of the ways
You must have heard of penny stocks at some point in your life. Remember the Wolf of Wall Street? It’s the stocks he used to get rich by aggressively selling shares of small companies, that are technically bankrupt and making millions from commissions. He later got into trouble with authorities for deceiving his customers.
They’re the stocks you need to buy if you expect sky-high returns. But you also have to be prepared to lose everything. You must have a high tolerance of risk because some very obscure and absurd events could move their prices.
Now what are the traits of penny stocks, apart from their low price per share? The most important is lack of any respectable history – either it’s not too good or it’s not too long. So no one can guess what their intrinsic value is. This is why their liquidity is much lower, since most investors stay away from them. For this same reason their bid-ask spread is huge. It leaves the risk of you not being able to even get the order you want at the price you want in a decent amount of time at times.
They’re also much less regulated and not obliged to disclose anywhere near as much information as a company listed in the top 100.
If you are going to dabble in penny stocks, you should be aware of the risks involved not just the potential gains. Make sure you research the company thoroughly and hope for the best! you don't have to be right all the time to make money as long as you are right on the big gainers.
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