Penny stocks are shares of small companies that trade for less than $5 per share. These stocks are often highly volatile and risky, and many penny stocks are scams. Investors in penny stocks may experience large losses in a short period of time.
Penny stocks are often traded on the OTC market, which is not as regulated as the major stock exchanges. This means that there is a greater chance for fraud and manipulation.
Many penny stocks are promoted by unscrupulous promoters who may be paid to pump up the stock price. These promoters may encourage investors to buy the stock, even if it is not a good investment.
Penny stocks may also be very illiquid, meaning that it may be difficult to sell your shares when you want to. This can lead to investors being stuck in a losing position.
Before investing in penny stocks, it is important to do your research. You should only invest in penny stocks that you understand and that you are comfortable with the risks.