Penny stocks are relatively low rated and less priced stocks traded in the stock market. These are stocks categorized to be traded under the price of $5. These have ability to give tremendous returns to an investor, if the investor chooses the stock wisely. On an average, there is only 1 out of 100 penny stock that can prove to be a real gem.
In spite of these penny stocks can be a game changer for any investor, on the flip side, these penny stocks have lot to factors to worry for a small investor.
The risk factors in Penny stocks may involve:
- Manipulations: These stocks are easily prone to manipulations by big investor. Promotion of various false positive statements through various means like Bulk SMS, newsletters, websites, fake press releases, and e-mail blasts to drive the interest of the stock into mind of small investors.
- Success ratio: On an average only one or two out of 100 penny stocks becomes a success and others proves to be a nightmare for the investors, which makes them lose their investment.
- De-Listed: The major markets don’t allow these penny stocks to linger forever. Continuous fall result in failure to meet the standards, resulting in no buyer and ultimately may get de listed by stock exchange.
- Go Lower: It is just a myth that it can’t go further lower than this. Ultimately, these penny stocks can go as much lower and can go to zero level too. Get to know how to avoid risks in penny stocks trading.
- Easily Attracted: In spite high risk of getting money dumped, these penny stocks are real attraction for small investors due to their low price.
- Highly volatile: These low prices stocks trades with real high volatility compared to blue chip. The price movement is too high as they can move either way in high percentage terms.