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Risks involving Penny Stocking

Risks involving in Penny Stocking

Penny stocking, or commonly known as Cent Stocking, is the act of investing by purchasing stocks of small public companies. There is no perfect definition as to what stocks can be categorized as a small stock or a big stock, however, most commonly a stock of less than a single US dollar is said be a penny stock, of course this is the criteria of judgment for the United States, and it will change from country to country. Penny stocking is considered to be highly speculative and excessively risky but offers the investors a high potential of profits. Penny stocks are held at a different market exchange and thus are not required to regulate under the Security and Exchange Commission, which is a body that takes up the responsibility to protect the average investor from frauds and deceits. This is one reason that Penny stocking is considered of high risk.

There are many risks involving Penny Stocking. These penny stocks are not listed in the major exchange market and have very little day-to-day volume. Simply put forth, one could purchase a penny stock and in the end fail to get someone to purchase it. Another risk involved with penny stocking is that analysts have deemed them uninteresting to analyze. One cannot get professional advice and analysis on penny stocks. Moreover, the companies selling penny stocks attempt to create a big hype around these stocks by posting impressive and attractive adverts on the internet, asking the viewers to invest in them as soon as possible. This often leads to the investors getting mislead. Penny stocks are also highly volatile, the rate at which the stock fluctuates between high and low is too quick, and would require too much care and attention to ensure that one doesn’t lose a chance to get high profit. Even though there are these risks in penny stock marketing, many individuals still opt to get involved in it.