Once the stock price rises, the scammers then “dump” their shares for a profit, while other investors are often left holding the bag when the stock crashes. In a pump-and-dump scheme, scammers pump a penny stock heavily using false or misleading information in an attempt to “pump up” the share price. Some key dangers to be aware of include pump and dump schemes, limited history to evaluate, and share dilution. While penny stocks can offer exciting potential, they also carry higher risks that investors should know before buying shares. Common Risks and Pitfalls to Avoid with Penny Stocks This makes reliable financial data more difficult to obtain. Additionally, smaller companies don’t have the same financial reporting requirements as large public companies. Penny stocks tend to have lower liquidity, making them harder to buy and sell. However, the lower share price also comes with increased risks. But that same $500 could buy thousands of shares of a $.50 penny stock. For example, if you invest $500 in a $20 blue chip stock, you may only acquire 25 shares. The low per-share price allows investors to buy more shares for less upfront capital compared to investing in well-known blue chip stocks. Penny stocks often trade over-the-counter instead of major exchanges like the NYSE and Nasdaq. Typically, these affordable stocks come from lesser-known businesses in new industries. Penny stocks are shares of small, emerging companies that trade for under $5 per share. What Are Penny Stocks and Why Consider Investing in Them? Once complete, you can decide if they deserve a place on your watch list or not. Then we’ll dive into this list of penny stocks and discuss some of the latest catalysts that might be important to account for. If you’re new to trading, in general, we’ll first go into some of the ins and outs of trading, including a background on low-priced stocks. Today we look at some of the most active penny stocks to watch.
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