penny stocks and their investment risks

Penny Stocks And Their Investment Risks

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It is always a risky business to play in the stock market. There are high-risk stocks and investments along with low-risk mutual funds. When comes to high-risk investment options, penny stocks are often on top of the lists as some of the highest risks you will find in the investment circles. They, of course, also offer some of the highest yield of any stocks. It is because the prices star so low and the sky is literally the limit. Don't shine your eyes when considering penny stocks as investments because there are many have gone before you enter the investment and very few have come back from the edge as wealthy men and women.


It is rarely a good ambition or dream as the low price of most penny stocks is perfectly acceptable for even a common man to have a few dreams of his own when it comes to gain wealth by playing the stock market game. There is also a much greater thrill with penny stocks than you will find in any casino with penny slots.


Some common risks which are associated with penny stocks may not be the risk one which would commonly assume related to the stock market. What you need to know is that trading penny stocks isn't regulated in the manner that the major stocks are regulated. A large safety net, to some degree, in the stock market are protected by, does not extend into the murky water of penny stock trading. It is a forgotten child of oversight and investors are left to fend for themselves.


The first risk is fraud and this risk seems to be rampant in the penny stock market. Many kinds of fraudulent penny stocks which are heavily marketed by overseas companies that look grossy and legitimate on the Internet, in investment magazines, and through brochures, and even carefully crafted and well written press releases, newsletters, and emails. The problem is that there is no product, or the demand is deceptively overrated and they are essentially junk stocks worth nothing, if they exist at all. The businesses in questions take the money, dump and never to be heard again. Unfortunately, this is quite common and many of these companies that perpetrate the frauds are located overseas. This is the biggest risk though certainly not the only risk.


The other risk is the companies which are listing as penny stocks are often smaller businesses or sometimes larger businesses those have fallen of the major exchanges radar for a reason or another and are either going through desperate restructuring or failing all together. Both pose real risks but if you choose to put your faith in the new business or old business that is getting its act together the proper way , you can find amazing profits on the other end of the roller coaster ride.


The other risk that is involved when trading penny stocks are the lack of financial reports. Corporations and companies that are traded in the major stock exchanges are required to release their information and account to their stockholders. The same doesn't hold true for penny stocks. There is no accountability and with very little public information. You really need to dig to find out credible information about the companies you are considering. You are also left with your gut more often not rather than relying on legitimate information that will be beneficial in your investment decision.


Penny stocks are very lucrative if you manage to pull off the investments and come out ahead. It can also be hard to make huge profits in these investments.


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penny stocks and their investment risks

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