The process of penny stocks is very simple. They dont cost much Even at the same time beginners have the wrong belief that as soon as they invest in penny stock it would be simple that they might earn money very easily. All kinds of knowledgeable investors will suggest that is really risky. It is vital that one must know the pros and cons of trading in this kind of investment.
- Kind of companies offering penny stock investment.
Penny stocks are generally offered by the company when they are undergoing severe financial crisis. Disadvantages of penny stock investment are that most of the times companies will fail to provide the returns to the investors.
It is one of the biggest disadvantages of penny stock investing for beginners. One must be very careful while selecting the best company for investment. Penny stock investing method is itself very risky.
- Kinds of risks
Penny stocks are thinly traded so they are the prime targets for fraudulent price manipulation. They vary greatly in their promise. Penny stocks are also very low in volume. Therefore, penny stock investing for beginners may be unhealthy also if they do not follow some basic rules. The United States Securities and Exchange Commission does not usually regulate penny stocks the way it does other stocks.
Therefore again it becomes another disadvantage for investors. Beginners must know that penny stock is perfect example of the old saying that great rewards always entail great risk. It is often seen that most investors who buy penny stocks earns little or no profits.
When a person is investing in penny stock, means that he is investing in a small company that has a huge financial crisis and the investor might never get things right and go bankrupt. As also these stocks are not tracked it becomes difficult to get the companys information.