Posts Tagged ‘trading penny stocks’

Penny Stock Trading

I had never heard of penny stocks before today and so I did a bit of research to find out some more about them. Obviously buying stock for a dollar with potential to earn a huge return is appealing to new and beginner investors but is the potential really there or is this just other get rich quick scam?

My initial research suggests that penny stocks may not be a good investment, their risk vs reward ratio can vary greatly. In investing circles penny stocks are stigmatized as finacially troubled companies that are ready to go bankrupt or making a last ditched effort to rescue themselves from it.

Penny stocks are only really appealing to other penny stock investors which means people are not willing to spend a lot to buy them, this make buying low and selling high difficult, other investors just don’t want to spend more than you have on risky and what they see as low quality stocks. It’s very hard for penny stocks to get off the ground as big players who have the real power to move their value up are excluded from buying them.

The overwhelming impression I get is that penny stocks are for people who want to gamble on the stock market, not for people who are looking to invest in it. You are better off doing some forex research and having a go at that.

My feeling is that looking for higher value and quality stocks that will pay a good dividend is a much better option. Playing in the low end of the market to get started is not a solid way to start investing, it’s a real case of you get what you pay for.

On average the best performing stocks in the market are at around $30, it would be a much wiser choice to hunt them out with good research than to play with penny stocks which is often like trying to pick the winning horse on if you like its name.