Penny Stocks Magazine
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How you can make (or lose) money on penny stocks
As we have seen earlier, penny stocks carry higher risks and also can give greater returns. This actually means that you can either lose a lot of money by investing in penny stocks (because of the higher risk factor) or make a lot of money (because of the higher potential returns). Which of these happens to you will depend a lot (but not only) on how you go about assessing the investment. Before we go further, however, you should be aware that no matter how much care you may take there is a certain amount of risk associated with penny stocks, which is much higher than in the case of large cap, stock exchange registered stocks.
Risks in penny stock investments
Penny stocks: There is always a risk factor associated with every stock, however being traded at few counters, the penny stocks are little more risky. The risk factor increases if you avoid some precautions that are necessary.
Penny Stocks Risks
The first point to remember is that large market cap stocks are likely to be registered on a national stock exchange such as NASDAQ. The reason for this is that when large volumes and amount are involved, which by definition is true for a large market cap stock, it is extremely difficult to get all that trade done outside a stock exchange. Although it is theoretically possible for a large stock to be traded on Pink Sheets and OTCBB, it will be difficult to sustain high volumes on these, because many people, who trade on recognized stock exchanges, may not trade in these stocks, particularly in large volumes.