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Even with already insolvent corporations, the stock can still be traded partially, but only in the over-the-counter market.

Investors should be wary of dealing with penny stocks for the reasons described. That means first and foremost: Better not put too much capital into penny stocks. As a long-term investments, penny stocks are not suitable, because the probability that they eventually worthless, is much higher than regular shares or even mutual funds. In comparison, these are quite secure investments in the long term. Investors are therefore usually better advised to trade classic, well-performing stocks.

Is the principle of hope worthwhile for Penny Stocks?

Nonetheless, penny stocks may serve as a small addition to the existing portfolio. Investors can buy penny stocks with little money just because each stock costs only a few cents. In this way, long-term investments can be supplemented by short-term speculation on individual penny stocks. After all, as we all know, hope dies last. Indeed, there have been a few instances in the stock market history of Penny Stocks recovering and finding their way back into the regulated stock market segment and into the profit zone. But these are the rare exceptions to the rule. In most cases, penny stocks develop negatively. Not without reason are they hardly in demand.

Cheating with Penny Stocks

The low value of penny stocks also attracts scammers. They can already buy large amounts of shares at low capital expenditures. Then they advertise in the stock market newsletters or forums for the penny stock and hope that in a short time as many people jump on the train and thus drive the course in the air. Then they sell their shares at a profit – and leave the late stragglers the losses. Investors should therefore enjoy stock market advice on penny stocks with great caution and ensure their integrity.

In 2013, this was one of the biggest scams in the US: a scam gang made a total of $ 140 million before being caught by the FBI. It drove up the price of real, almost worthless, and largely controlled penny stocks with a sophisticated fraud construct. For example, various brokers and bank accounts were used to trade the penny stocks in a big way. Also fake press releases and blackmail were part of the repertoire of fraudsters.

Brokers looking for low order commissions

The market for penny stocks is risky. After all, the extremely low prices of stocks ensure that investors can trade relatively large amounts of penny stocks without investing too much capital. For 100 euros, there are at least 200 shares, if each has only a price of 50 cents. However, so that the order costs for buying and selling are not disproportionately high, investors should look for an online broker, which only charges a trading volume-dependent order commission without a minimum fee.

Post Author: Lucas Poulsen