Penny Original

The World of Penny Stocks

In the world of high finance and multi-billion dollar accounts, it’s curious that so many people are interested in penny stocks. Penny stocks, shares of small public companies that sell for less than $1.00, are often faulty investments that carry a high amount of risk.

Risky Investment

Many companies by hundreds of thousands of shares and promote the company with creative press releases and misguided websites inducing investors to buy many shares while the company who originally bought the penny stocks in bulk sell their shares on the back end. This type of business creates a false market for buyers leaving them with worthless stocks. Penny stocks usually have low liquidity making it very difficult for companies to liquidate their shares.  Many investors buy shares in companies they heard about for free and usually there is a reason websites provide these insider trading tips for free: they’re the same companies that bought the stock in bulk and are looking to sell shares once investors start buying. Because of such scams, penny stocks has, excuse the pun, rubbed investors the wrong way.

Weak Retail Market

This week looks to be especially hard on penny stocks as the U.S. government announced weak retail sales for the first part of February. There was speculation that there would be an upswing in the market after sales rose .3% in January. The retail market was originally projected to lose .6%. Unfortunately, sales have slowed and we’ve seen a weak February as both the DOW and NASDAQ have been hit especially hard.

There is a lot of upside to penny stocks, the trick is to invest wisely. Investors buying in stocks with low visibility, low tradability will lose money for certain. Play the market, but be mindful of small changes. Companies will try to exaggerate the truth which will drive up stock prices by creating false market.

About the Author

Mark is an online journalist. He has been penny stock trading for 3 years now and has had ups and downs but now is doing quite well with it.

The Beatles – Penny Lane